FTX, a bankrupt crypto exchange, has filed a lawsuit against former employees of its Hong Kong affiliate, Salameda, in an attempt to recover over $157 million that was fraudulently taken by them. The lawsuit, filed with the United States Bankruptcy Court for the District of Delaware, alleges that the defendants used their connections to FTX employees to bypass pending withdrawal requests and retrieve millions in crypto assets before the exchange filed for bankruptcy.
The former employees named in the lawsuit are Kevin Nguyen, Darren Wong, Michael Burgess, and Matthew Burgess. They were previously employed by Salameda and held senior-level roles at FTX and Alameda Research. After leaving their positions at FTX in January 2022, they established several businesses that conducted crypto trading on the FTX.com and FTX.US exchanges.
According to the plaintiffs, Michael Burgess, Nguyen, and Wong either jointly or individually controlled companies such as 3Twelve and BDK, which had accounts on FTX.com and FTX.US registered in their names. These companies engaged in trading activities that averaged between $100 million and $400 million in volume from January to November 2022.
The defendants allegedly made significant profits from handling FTX’s crypto trades. Before the exchange went bankrupt, Wong received over $70 million from selling the FTX Token, FTT.
When news of FTX’s insolvency spread, Michael Burgess, Nguyen, and Wong hurried to withdraw their assets along with thousands of other customers. While the backlog of pending withdrawal requests grew, the defendants took advantage of their relationships with FTX employees and were given priority over other customers.
Matthew Burgess, who was still an FTX employee at the time, misrepresented Michael’s accounts as his own and expedited the withdrawal process. Matthew also pushed for accounts registered in the name of Lesley Burgess, his and Michael’s mother, to be prioritized above others. In total, they were able to withdraw crypto assets worth $157.3 million before FTX halted withdrawals on November 8.
The plaintiffs are seeking to recover the assets that were transferred to the defendants and to disallow any claims held by them until they return the funds. FTX is also requesting reimbursement for their attorney’s fees, pre- and post-judgment interests, and the costs of the lawsuit.
It is important to note that the information provided in this article is based on the filing made by FTX with the United States Bankruptcy Court for the District of Delaware. The allegations made in the lawsuit have not been proven in court.
Sources:
– Filing with the United States Bankruptcy Court for the District of Delaware: https://cryptopotato.com/ftx-seeks-to-recover-over-157m-fraudulently-taken-by-ex-employees-of-hong-kong-affiliate/
– The Fall of Sam Bankman-Fried’s Crypto Empire: A Timeline of FTX’s Collapse: https://cryptopotato.com/ftx-seeks-to-recover-over-157m-fraudulently-taken-by-ex-employees-of-hong-kong-affiliate/
– Binance FTX Botched Acquisition: A Timeline of High-Profile Bailout That Never Happened: https://cryptopotato.com/ftx-seeks-to-recover-over-157m-fraudulently-taken-by-ex-employees-of-hong-kong-affiliate/
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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