FTX Clients File Lawsuit to Recover Crypto Assets

A group of FTX Trading clients are suing the bankrupt cryptocurrency exchangealleging that its top executives stole their digital assets and deliberately blocked them from making withdrawals.

California resident Austin Onusz filed a class action lawsuit on Tuesday alongside three other FTX users from the Netherlands, Turkey and the United Kingdom. The lawsuit names FTX founders Sam Bankman-Fried and Gary Wang as defendants along with Caroline Ellison, former CEO of FTX hedge fund Alameda Research.

Bankman-Fried and Ellison knowingly sent clients’ crypto funds to Alameda Research without their consent, according to attorneys representing Onusz.

“Such misconduct was in direct violation of FTX’s Customer Agreements and Terms of Service, as well as common law and fundamental principles of honesty and fairness,” states the lawsuit, which claims the class action could encompass more than one million FTX customers.

Under Bankman-Fried’s leadership, FTX lost up to $2 billion in client digital assets, according to the lawsuit.

Onusz and the other plaintiffs said in court documents that they had stored cash and digital assets on FTX’s platform, but had been unable to make a withdrawal since early November. FTX users who can’t access their funds should be given priority status once bankruptcy proceedings are completed and it’s time to distribute the company’s remaining assets, plaintiffs’ attorneys say.

FTX, which was charged with negligence and breach of contract in the lawsuit, did not immediately respond to a request for comment.


FTX founder Sam Bankman-Fried under house arrest after being released on $250 million bail

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FTX filed for bankruptcy last month after experiencing the crypto version of a bank run. Customers withdrew 5 billion dollars in a single day amid growing concerns over FTX’s solvency.

Since then Bankman-Fried, 30, has been arrested and charged with fraud, conspiracy and money laundering. He was arrested in the Bahamas earlier this month before being extradited to the United States, where he was released last week on $250 million bail. Bankman-Fried is now at their parents place in California awaiting trial. According to federal prosecutors, the $250 million bond is considered the largest pre-trial federal bond.

Ellison and Wang pleaded guilty to fraud charges.

New FTX CEO John J. Ray III called the company’s former management the worst he had seen in his 40-year career, including overseeing the Enron bankruptcy. He told federal lawmakers earlier this month that FTX collapsed because the “very small group of extremely inexperienced and unsophisticated individuals” who ran the company “failed to implement virtually any of the systems or controls needed by a business that is entrusted with other people’s money or property.”

Assistant U.S. Attorney Nicolas Roos said in U.S. District Court last week that Bankman-Fried “committed fraud of epic proportions.”

— The Associated Press contributed to this report.

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