FTX Customers Take Action in Bankruptcy Proceedings, Seek Damages

• A class-action lawsuit has been filed against FTX executives with the US Bankruptcy Court for the District of Delaware, accusing them of intentionally misappropriating customers’ funds.
• Plaintiffs of the lawsuit are asking the court to declare that any customer property held on behalf of customers does not belong to the company and that customers should be given priority to repayment of customer property.
• They are also seeking damages in an amount to be determined at a trial by jury.

A group of FTX users have taken the unprecedented step of filing a class-action lawsuit with the US Bankruptcy Court for the District of Delaware in order to protect their rights in the exchange’s bankruptcy proceedings. The lawsuit, filed by exchange customers Austin Onusz, Cedric Kees van Putten, Nicholas J. Marshall and Hamad Dar and “all others similarly situated”, accuses former FTX executives of intentionally misappropriating customers’ funds to fund risky strategies and a lavish lifestyle in the Bahamas “in direct violation of FTX’s own customer agreements and terms of service.”

The court filing alleges that FTX executive defendants “failed to institute any corporate controls and were therefore able to cause, direct or allow the misappropriation of billions of dollars in customer funds and digital assets deposited or held worldwide at FTX.” The plaintiffs of the lawsuit are seeking a court order to declare that any customer property held on behalf of customers does not belong to the company and that customers should be given priority to repayment of customer property. They are also seeking damages in an amount to be determined at a trial by jury.

The case against FTX has been building for some time, with FTX founder Sam Bankman-Fried facing felony charges in the US and two other executives, Gary Wang and Caroline Ellison, having pleaded guilty to fraud charges. It is clear from the legal filings that the plaintiffs believe that the exchange’s executives have misused customer funds, and they are now seeking to ensure that customers are the first to be repaid in the exchange’s bankruptcy proceedings.

The class-action lawsuit is an important step in protecting customers’ rights in the FTX bankruptcy proceedings and ensuring that customers are not left out of pocket. It is yet to be seen how the court will rule on the case, but it is clear that the plaintiffs are determined to ensure that FTX’s customers are the first to be repaid.

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