22 September 2023
It’s been almost a year since the collapse of FTX, but the failed crypto exchange continues to be surrounded by drama. In a flurry of moves to claw back funds for investors, FTX lawyers are now going after employees of Salameda Ltd.
According to court filings, the employees of Salameda – a Hong Kong-incorporated entity allegedly controlled by former FTX CEO Bankman-Fried, named as defendants were prioritized over other customers as many raced to withdraw their assets from the exchange before its imminent crash on November 11, 2022.
FTX Wants $150 Million Back
The filing alleges Michael Burgess, Matthew Burgess, Kevin Nguyen, and Darren Wong, all former employees of Salameda, fraudulently withdrew assets in their FTX accounts just hours before bankruptcy. Court filings suggest that while the defendants worked for Salameda, they were effectively employees of the FTX Group, as they worked in senior-level roles at FTX Group companies.
Before its imminent crash, FTX had been under public scrutiny as many investors had concerns about the exchange’s liquidity and solvency. This prompted many FTX.com and FTX US customers to make withdrawal requests leading up to billions of dollars.
As the backlog grew, many had to wait for days for their withdrawals to be processed, with some not receiving their money before the exchange filed for bankruptcy. However, court documents show that the defendants received the benefit of withdrawals ahead of other customers due to their connections to FTX Group executives.
Personal messages show one of the defendants, Matthew Burgess, urging other employees to expedite a pending withdrawal request for $73 million from one of Michael Burgess’s accounts on the exchange.
The defendants were able to withdraw $157.3 million based on pricing as of August 31, 2023, with the majority of those coming withdrawn on or after November 7, 2022. FTX attorneys are now demanding the full amount be returned, arguing that the funds were improperly transferred to the defendants without the required procedures being followed.
Trying To Recover
Since filing for bankruptcy in November 2022, FTX has filed several lawsuits hoping to claw back money to pay some of its investors and customers. The exchange’s attorneys filed a similar case in July, as it went after executives of its European subsidiary in a bid to recover $323 million.
Lawyers recently went after Sam Bankman-Fried’s parents, accusing them of misappropriating funds from the exchange while it was still in operation. However, the parents, both law professors at Stanford Law School, dismissed the claims as completely false. Sam Bankman-Fried is set to be tried in court starting on October 3 for eight charges brought against him.