The cryptocurrency exchange FTX, which has declared bankruptcy, has filed a lawsuit against former employees of its Hong Kong affiliate, Salameda. The lawsuit seeks to recover $157.3 million that FTX alleges was fraudulently withdrawn in the lead-up to the exchange filing for bankruptcy.
The defendants in the case include Michael Burgess, Matthew Burgess, and Lesley Burgess – the mother of Michael and Matthew, Kevin Nguyen, and Darren Wong, along with two companies.
FTX’s New Management Wants to Recover Stolen Funds
These individuals and entities allegedly owned companies with registered accounts on FTX.com and FTX US and were able to withdraw funds in the “preference period” before the actual bankruptcy filing. The lawsuit alleges that these transfers were made with the intent to hinder, delay, or defraud FTX US’s present or future creditors.
Just a few hours before FTX suspended its withdrawal services on November 8, 2022, the transfers were successfully carried out. As per the valuation on August 31, 2023, the total worth of these assets is estimated to be around $157.3 million.
FTX has stated that a substantial portion of these assets, amounting to more than $123 million were withdrawn on or after November 7. This includes over $73 million that was allegedly transferred fraudulently to Michael Burgess.
It is also alleged that Mathew Burgess pressured FTX employees to “push out” particular pending withdrawal requisitions from one of Michael Burgess’s FTX US exchange accounts while misrepresenting the account to be his own.
This situation unfolds as Sam Bankman-Fried (SBF), the ex-CEO of FTX, remains in custody, awaiting his two-part trial. The first part is scheduled to start on October 3, 2023, while the second part is expected to take place in March 2024.
On September 21, the court ruled against SBF’s request for an early release from jail. However, that same day, a motion put forth by the Department of Justice (DOJ) was approved by Judge Lewis Kaplan, which resulted in the prohibition of testimony from SBF’s key witnesses.