FTX Clients File Class Action Lawsuit – Economy
FTX clients launch a class action lawsuit against the bankrupt crypto exchange and its former executives to save their wealth. “Members of the customer group should not have to stand in line with secured or unsecured creditors in this bankruptcy proceeding just to participate in the diminished assets of FTX Group and Alameda,” the complaint said, filed in the US bankruptcy court in Delaware.
Insolvency administrators in the Bahamas and Antigua as well as administrators of the bankruptcy estate of Blockfi, another insolvent crypto company, are already fighting over the remaining assets of the crypto exchange. FTX did not immediately respond to a request for comment.
The plaintiffs want to ensure that traceable customer assets are not included in the bankruptcy estate of either FTX or Almeda. If, on the other hand, the court finds that the customer funds are owned by the crypto companies, the private customers will demand a priority right to repayment over other creditors.
Crypto companies are lightly regulated and are often based outside of the United States. Therefore, deposits are not guaranteed as with US banks and brokers. This raises the question of whether the company or the customers own the deposited funds.
The key crypto currency Bitcoin has lost around 60 percent this year. The broader crypto market has shrunk by $1.4 trillion on the collapse of FTX, Celsius, and supposed “stablecoins” Terra USD and Luna.
US crypto exchange Kraken will suspend operations in Japan next month due to difficult market conditions and a soft global crypto market. Kraken will deregister from the Financial Services Authority (JFSA) on January 31, the company said. By that date, customers would have to withdraw their holdings.
Last month, Kraken announced it would cut around 30 percent of global jobs as difficult market conditions paralyzed demand for digital assets.