- FTX has filed a lawsuit against individuals linked to a Hong Kong-based affiliate, seeking the recovery of $157 million
- The exchange says that the individuals, including employees and family members of Salameda, received “preferential transfers” before FTX filed for bankruptcy
- FTX asserts that these accused individuals exploited their connections to prioritize their withdrawals
FTX’s lawyers have continued their efforts to claw back funds by suing the employees of a Hong Kong-based affiliate for $157 million. FTX alleges that employees and family members of Salameda received ‘preferential transfers’ in the run-up to the exchange filing for bankruptcy and illegally withdrew them. FTX alleges that the individuals raced to withdraw the funds because they knew the writing was on the wall, using their connections to get priority over regular customers.
Accused Used Contacts to Push Withdrawals Through
FTX made the filing late Thursday, alleging that Michael Burgess, Matthew Burgess and their mother Lesley Burgess acted fraudulently in withdrawing their portions of the $157.3 million allegedly taken. Kevin Nguyen, Darren Wong, and two affiliated companies are the other co-accused, with FTX alleging that they all emptied their FTX accounts while customers were experiencing a withdrawal backlog.
The withdrawals are said to have taken place during the crucial 90 days before FTX filed for bankruptcy on November 11, 2022, known as the ‘Preference Period’. The filing cites messages from the communications platform Slack which the group used, alleging that Matthew Burgess conspired with fellow FTX employees to expedite certain pending withdrawal requests from one of Michael Burgess’ FTX US exchange accounts while misleading others by presenting the account as his own.
Timing is Key
Perhaps the most significant revelation in the filing is the timing of these asset transfers; they were executed shortly before FTX suspended all withdrawal activities on November 8, 2022. Notably, a substantial portion of the total $157.3 million, approximately $123 million based on August 31, 2023, pricing, was withdrawn on or after November 7, 2022. The court document asserts that these transfers were carried out with the clear intent to hinder, delay, or defraud FTX US’s existing and potential creditors.
Stories of customers trying to get funds off FTX in any way possible abounded during the bankruptcy process, with some paying over a million dollars to have FTX staff change their residences to Bahamas in the system in order to facilitate their withdrawals quicker.