The insolvency proceedings concerning the U.S. digital currency platform FTX continue to evolve. As reported, FTX has initiated legal action against the parents of its founder and former CEO, Sam Bankman-Fried (SBF), alleging misappropriation and seeking restitution of funds. Prior to the formal declaration of FTX‘s insolvency, termed the “Preference Period,” the named parties allegedly benefited from transactions deemed as preferential transfers, as per the legal documentation.
FTX, now under bankruptcy protection, has filed a lawsuit against former associates of Salameda, a corporation registered in Hong Kong and purportedly linked to FTX. The claim suggests that Salameda was under the influence of FTX‘s former Chief Executive, SBF. The objective of this legal action is to reclaim an approximate sum of $157.3 million, as detailed in a recent judicial submission.
The legal document accuses Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, Darren Wong, and two corporate entities of controlling multiple accounts on FTX.com and FTX US. It is alleged that these parties executed unauthorized asset withdrawals shortly before FTX declared bankruptcy.
Within the three months preceding the insolvency declaration on November 11, 2022, these individuals and entities allegedly benefited from transactions that are considered preferential transfers and are subject to challenge under the Bankruptcy Code. The submission contends that these parties expedited their asset withdrawals, leveraging their relationships with FTX staff to gain precedence over other clientele.
Further, the submission references communications on the Slack platform, suggesting that Matthew Burgess solicited assistance from fellow FTX staff to expedite certain withdrawal requests from an account held by Michael Burgess on FTX US while falsely presenting the account as his own. These transactions were finalized mere hours before FTX suspended withdrawal operations on November 8, 2022.
A significant portion of the funds, amounting to over $123 million of the total $157.3 million (valued as of August 31, 2023), were reportedly withdrawn on or subsequent to November 7. The legal document posits that these transactions were executed “with the intention to obstruct, protract, or defraud the current or prospective creditors of FTX US.
SBF is presently incarcerated, awaiting his forthcoming trial set for October 3. A recent decision by an appellate court has denied his petition for release prior to the trial’s commencement.