FTX Lawsuit Says Burned Users ‘Should Not Have to Stand in Line’ With Other Creditors

A consortium of FTX customers has filed a class action lawsuit against the failed exchange, seeking confirmation that the company’s crypto holdings belong to customers.

The filing said that “customer class members should not have to stand in line” with other creditors looking to share in the remaining assets of FTX Group and Alameda Research and that these assets “should be earmarked solely for customers.”

The lawsuit seeks a declaration that “traceable customer assets” are not the property of FTX, including those assets held by Alameda that are still traceable to customers.

In addition, the action alleged that FTX failed to segregate and misappropriated customer accounts, despite pledging to do so, and therefore these customers should be repaid first. 

If the court instead determines that these customer assets are, in fact, FTX property, the lawsuit will then seek to ensure customers are still paid first, ahead of other FTX creditors. 

The FTX collapse may have impacted over 1.2 million customers in the U.S. alone, based on the firm’s reported user numbers. 

FTX, Alameda lawsuits pile up

These consumers aren’t the only ones attempting to wrangle back any remaining funds from the bankrupt FTX. Corporate entities, including the defunct crypto lender BlockFi are also waiting in line.

In late November, a court found that FTX and Alameda Research both owe BlockFi more than $1 billion, including $671 million on a now-defaulted loan to Alameda and $355 million in funds frozen on the company’s crypto exchange.

A November court filing found that the exchange owes approximately $3.1 billion to its top 50 external creditors, many of whom are still unknown.

The recent news comes after U.S. District Judge Lewis Kaplan replaced Ronnie Abrams as the judge overseeing the criminal trial of Sam Bankman-Fried. 

The judge, who previously worked on the first federal Bitcoin securities fraud prosecution, has previously represented Prince Andrew, Duke of York, and will oversee the eight criminal charges now facing Bankman-Fried.