FTX customers sue for priority repayment: what investors need to know
Four customers of FTX have filed a class action lawsuit to the Delaware Bankruptcy Court (the venue of FTX's bankruptcy proceedings), demanding priority in repaying customers' capital losses of about 2 billion dollars.
The customer claimed that FTX transferred the funds to the closely related investment fund Alameda Research in the way of "illegal" and "directly violating FTX's own customer agreement and service terms, as well as the basic principles of common law and honesty and fairness"
The lawsuit argued that retail customers who suffered financial losses due to the bankruptcy of FTX and sister company Alameda Research should not wait in line with other creditors to recover their funds.
A committee representing unsecured creditors has been set up. The committee consists of more than 100 entities investing in failed exchanges and their subsidiaries. These entities have no collateral to repay the debts owed by FTX to them.
The court document pointed out that "the cash and assets traceable to the customer, which never belong to FTX or Alameda, nor to the estate, should be specifically designated to the customer, and the injured customer should also have priority in obtaining any other cash owned or recovered by FTX or Alameda. [Affiliated debtor group]," The Block reported.
Sam Bankman Fried, the co founders of FTX and Alameda, and Gary Wang, and Caroline Ellison, the former CEO of Alameda, face multiple fraud allegations respectively.
Ellison and Wang have pleaded guilty to criminal and civil charges.