Bankrupt cryptocurrency exchange FTX has initiated legal action against former employees of Salameda, a Hong Kong-based entity once affiliated with FTX.
As stated in a recent court filing, the lawsuit aims to recover approximately $157.3 million. The defendants, including Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong, allegedly exploited their connections to FTX personnel.
Consequently, they managed to fraudulently withdraw assets in the days leading up to FTX’s bankruptcy filing on November 11, 2022.
The court documents reveal that the defendants benefited from withdrawals, termed “preferential transfers,” during the 90 days preceding the bankruptcy filing. These transfers are “avoidable under the Bankruptcy Code,” according to the filing.
Moreover, the defendants allegedly prioritized their withdrawals over other customers by leveraging their relationships with FTX staff. This marks yet another attempt by the FTX bankruptcy estate to reclaim payments, following previous efforts targeting former CEO Sam Bankman-Fried and other related parties.
A web of financial intrigue
The lawsuit also cites Slack messages as evidence that Matthew Burgess solicited other FTX employees to expedite specific pending withdrawal requests. These requests were from one of Michael Burgess’s FTX US exchange accounts, misrepresented as Matthew’s own. The withdrawals were finalized a few hours before FTX ceased all non-fiat user withdrawals on November 8, 2022. Significantly, more than $123 million of the total $157.3 million were withdrawn on or after November 7, 2022.
The court filing asserts that these transfers were executed “with the intent to hinder, delay, or defraud FTX US’s present or future creditors.”
Additionally, the lawsuit comes at a time when former FTX CEO Sam Bankman-Fried is in jail, awaiting his trial set to commence on October 3, 2023. An appeals court recently denied his request for pre-trial release, further complicating his legal situation.
The lawsuit against the former Salameda employees is part of the effort to recover assets following FTX’s bankruptcy. In January, a bankruptcy attorney stated that FTX had already recovered more than $5 billion in various assets. However, the bankruptcy team later revealed that the company still owes its customers about $8.7 billion.