Embattled crypto exchange FTX has filed a lawsuit against former employees of Hong Kong affiliate Salameda, which the suit says was under the control of then-FTX CEO Sam Bankman-Fried at the time, to recover an estimated $157.3 million that was allegedly withdrawn from the exchange under preferential treatment.
The lawsuit, filed on Thursday, said that the employees and affiliates – Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen and Darren Wong – were trading in the hours leading up to FTX’s filing for Chapter 11 bankruptcy protection on Nov. 11, 2022. Of the total $157.3 million in assets removed from the platform, more than $123 million was withdrawn on or after Nov. 7, the day before FTX suspended withdrawals on the platform.
As the backlog of pending customer withdrawal requests grew, many customers waited hours or days for withdrawals to be completed, and many more withdrawal requests remained unfulfilled,” the filing says. “Defendants Michael Burgess, Nguyen and Wong also raced to withdraw assets from their various individual and corporate accounts on the FTX.com and FTX US exchanges, but they had advantages over average customers: as detailed below, they leveraged their connections to FTX Group personnel to ensure that they would be prioritized over other customers.”
The complaint continues: “Matthew Burgess, a then-current FTX Group employee, enlisted other FTX Group employees to “push out” certain pending withdrawal requests from one of Michael Burgess’s FTX US exchange accounts, while misrepresenting the account to be his own.
Under U.S. bankruptcy law, creditors can sue in relation to withdrawals that happen within 90 days of when a company files for bankruptcy bankruptcy protection in what’s known as the “Preference Period.”
Around $73 million of the assets in question were alleged to directly benefit Michael Burgess. Burgess, who had already left FTX Group at that point, is also accused of asking FTX employees to fast-track pending withdrawal requests from an FTX.US account belonging to one of his businesses while claiming that the account was his own.
FTX founder and former CEO Sam Bankman-Fried is currently detained and awaiting a trial scheduled to commence on Oct. 3. Bankman-Fried is accused of defrauding customers of FTX and its trading arm, Alameda Research, of hundreds of millions of dollars. Bankman-Fried has pleaded not guilty of the charges.