FTX Customers Request Priority Treatment in Asset Settlement 

Jimmy Aki
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As the saga surrounding the collapse of FTX continues to unfold, the defunct exchange’s customers are now clamoring for priority settlement and a declaration of the company’s assets. 

No Sitting on the Sidelines

Earlier this week, four plaintiffs claiming to represent the entirety of FTX’s customers filed a class action suit with the United States Bankruptcy Court for the District of Delaware. In the suit, the plaintiffs requested disclosure of the exchange’s holdings and assets, arguing that customers should not be left behind as the company works to repay its creditors. 

So far, reports have suggested that FTX may have to compensate over a million customers. As the recent lawsuit explained, the company was responsible for not combining customer funds with exchange assets under its User Agreement document. This means that any withdrawal of customer funds from accounts was an “impermissible co-mingling, misappropriation, misuse, or conversion of customer property.” 

Now that the company is insolvent, the class action suit argues that customers should be given property settlement as FTX gradually settles its creditors. The suit also argues that any funds frozen by authorities and traceable as customer property shouldn’t be used to pay non-customer expenses or claims until the customers have been settled. 

The Quest for Missing Funds 

The suit is coming at a time when FTX’s entire bankruptcy saga continues to unfold. FTX imploded a little over a month ago, with billions of dollars in funds currently being unaccounted for. With authorities expected to hold former company chief executive Sam Bankman-Fried accountable, customers and creditors appear only concerned with their funds’ return. 

On Tuesday, Bloomberg reported that the Department of Justice had launched a formal investigation into the sudden disappearance of about $372 million from the exchange’s wallets. The funds had been moved on November 11 – the day of FTX’s bankruptcy filing. Ryne Miller, the company’s general counsel, had confirmed that the fund movement was unauthorized and that FTX.US had moved all of its funds into cold wallets as a safety precaution. 

A blog post from blockchain forensics firm Elliptic reported that the alleged hack drained different tokens on the Ethereum, Avalanche, and BNB Smart Chain. The firm reported that about $663 million had been drained, although only $477 million was suspected of having been stolen, while the rest was moved to secure storage by FTX following the hack.

In the latest update on the matter, crypto researcher ZachXBT alleged that some stolen funds had been transferred to Singapore-based exchange OKX via a cryptocurrency mixer. OKX managing director Lennix Lai responded that they had been aware of the situation and would investigate the flow of funds. 

 

  

Interestingly, there has also been a massive movement of funds from wallets associated with FTX’s sister firm, Alameda Research. Just days after Bankman-Fried was released on a $250 million bail, wallets belonging to the insolvent hedge fund were seen exchanging bits of ERC-20 tokens for Ethereum (ETH) and Tether (USDT), then funneling the tokens through different exchanges and mixers. 

 

Many have speculated that the movements could be due to another hack job, but it looks more like top brass at FTX and Alameda moving funds out of both platforms and salvaging whatever money they can get their hands on. 

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.