The lawsuit alleges that FTX Trading’s top executives intentionally “misplaced” billions of dollars in users’ digital assets.
A coalition of former FTX Trading users have filed a lawsuit against the bankrupt cryptocurrency exchange, claiming that its executives misappropriated consumers’ digital assets and intentionally prevented them from making withdrawals.
According to CBS News, the class action lawsuit was filed on behalf of California resident Austin Onusz on Tuesday. It names as defendants FTX Trading founders Sam Bankman-Fried and Gary Wang, as well as Caroline Ellison, the former C.E.O. of the exchange’s hedge fund, Alameda Research.
Attorneys for Onusz allege that Bankman-Fried regularly and knowingly transferred consumer cryptocurrency currency funds to Alameda Research without users’ consent.
“Such misconduct was in direct violation of FTX’s own customer agreements and terms of service as well as common law and basic principles of honesty and fair dealing,” the lawsuit states.
CBS News notes that the class action could encompass more than 1 million former FTX consumers.
Bankman-Fried has since been accused of misplacing digital assets worth up to $2 billion.
In their lawsuit, Onusz and other plaintiffs state that they transferred cash and digital assets to FTX Trading—assets that they were unable to recover.
Since November, attorneys claim, FTX Trading effectively prevented its users from withdrawing assets that were stored in or held by the platform.
Now, the same consumers have asked the court to grant them priority status once FTX Trading’s bankruptcy proceedings are completed and the company’s remaining assets are distributed amongst its creditors.
DeCrypto notes that FTX’s members are not the only persons seeking to recover assets from the company—corporate entities, including the now-defunct cryptocurrency lender BlockFi, are also hoping to obtain investments.
Nevertheless, attorneys for the class say that their clients should not be forced to compete with corporate lenders to retrieve their own assets.
Under certain, limited circumstances, consumers’ frozen assets could be treated as FTX’s assets—meaning that users’ investments could be used to repay corporations.
“Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda,” the class action states.
In the lawsuit, lawyers for Onusz and the other class members say that users’ assets “never belonged to FTX or Alameda.”
Bankman-Fried, adds The New York Post, is currently facing eight federal charges that could carry a combined sentence of up to 115 years in prison.
The disgraced executive is currently on house arrest after posting a record-breaking $250 million bond.
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