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Former FTX Customers File Class-Action Lawsuit Demanding Priority Reparations

On December 27, a class-action lawsuit was filed in the United States Bankruptcy Court for the District of Delaware by four individuals representing a potential class of up to one million former customers of the cryptocurrency platform FTX.

FTX Logo
FTX Logo

The plaintiffs are seeking priority access to frozen funds held by FTX US or in order to return digital assets to customers.

The lawsuit claims that the FTX User Agreement did not allow the platform to use customer funds for its own purposes, such as borrowing or paying operating expenses.

The removal of customer funds from accounts was therefore deemed an "impermissible co-mingling, misappropriation, misuse, or conversion of customer property." As a result, the lawsuit argues that any funds frozen by FTX and traceable as customer property should not be used to pay non-customer expenses, claims, or creditors until customers are repaid.

The plaintiffs argue that they should not have to stand in line with secured or unsecured creditors in the bankruptcy proceedings in order to share in the assets of FTX Group and its sister company, Alameda Research. This comes after the Department of Justice launched an investigation into the missing $372 million in digital assets from FTX.

On November 12, FTX warned customers of abnormal wallet activity involving the transfer of 228,523 Ether out of the exchange by an unknown perpetrator. Additionally, the crypto wallets associated with Alameda Research, which has since declared bankruptcy, began transferring out funds shortly after FTX founder Sam Bankman-Fried was released on a $250 million bond.