Key takeaways :
- FTX Files Lawsuit Against Former Salameda Employees for $157.3 Million.
- Allegations of Fraudulent Withdrawals Hours Before FTX Bankruptcy Filing.
In a high-stakes legal confrontation, bankrupt cryptocurrency exchange FTX has initiated legal proceedings against four former employees of its Hong Kong-based affiliate, Salameda. This affiliate is believed to have been directly overseen by FTX’s former CEO, Sam Bankman-Fried.
FTX, along with two affiliated companies, has accused the individuals Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong of exploiting their personal connections to prioritize withdrawing their assets from FTX when concerns about the exchange’s future arose.
According to the lawsuit, during the 90-day period leading up to FTX’s Chapter 11 bankruptcy filing in November, the defendants collectively benefited from withdrawing digital assets and fiat currency from their FTX.com and FTX US accounts.”
This development closely follows Sam Bankman-Fried’s unsuccessful attempt to secure early release, as his application was denied by a three-judge panel in the United States Court.
The lawsuit alleges that Michael Burgess, Matthew Burgess, their mother Lesley Burgess, Kevin Nguyen, Darren Wong, and two affiliated companies held accounts with multiple firms registered at FTX.com and FTX US. It further asserts that these entities engaged in fraudulent asset withdrawals in the days leading up to FTX’s bankruptcy.
During the 90-day period preceding the November 11, 2022, bankruptcy filing, known as the Preference Period, the defendants received the benefit of these withdrawals, which are classified as preferential transfers and are subject to avoidance under the Bankruptcy Code, as per the filing.
According to the allegations, the defendants raced to withdraw assets and leveraged their connections within FTX personnel to secure priority status over other customers.
The accusations center on the withdrawals made from their FTX.com and FTX US accounts, involving both digital assets and fiat currency. As stated in the court filing, as of August 31, 2023, the collective value of these assets is estimated to reach as high as $157.3 million.
The lawsuit unveils the intricacies of the alleged scheme, asserting that Matthew Burgess, an employee of the FTX Group during that period, recruited fellow FTX Group employees to expedite withdrawal requests from one of Michael Burgess’s FTX US exchange accounts. This process involved deception, with the account being misrepresented as belonging to Matthew Burgess himself.