Bankrupt crypto exchange FTX has sued former employees of Salameda, a Hong Kong-incorporated entity affiliated with FTX that it says was controlled by the firm's ex-CEO, Sam Bankman-Fried, to recover about $157.3 million, according to a court filing late Thursday.
The filing alleges Michael Burgess, Matthew Burgess, their mother Lesley Burgess, Kevin Nguyen, Darren Wong and two companies owned or controlled several firms that had accounts registered at FTX.com and FTX US, and fraudulently withdrew assets in the days leading up to FTX's bankruptcy.
During the 90 days before the Nov. 11, 2022 bankruptcy filing, known as the Preference Period, the defendants received the benefit of withdrawals that constitute preferential transfers and "are avoidable under the Bankruptcy Code," the filing said. The defendants raced to withdraw assets and exploited their connections to FTX personnel to ensure they would be prioritized over other customers, according to the filing.
This isn't the first time the FTX bankruptcy estate has tried to claw back payments from related parties. It has already targeted Bankman-Fried and his executives, Bankman-Fried’s parents and FTX’s philanthropic and life science arms. It's also trying to reclaim payments made to Genesis Global Capital, which is owned by CoinDesk's parent, Digital Currency Group, and is also bankrupt. In January, a bankruptcy attorney said FTX had recovered more than $5 billion in different assets. In June, the bankruptcy team said the company owed its customers $8.7 billion.
The filing also alleges, citing messages on communications application Slack, that Matthew Burgess enlisted other FTX employees to “push out” certain pending withdrawal requests from one of Michael Burgess' FTX US exchange accounts while misrepresenting the account as his own.
The transfers were completed just hours before FTX halted withdrawals on Nov. 8, 2022. More than $123 million of the total $157.3 million (based on Aug. 31, 2023, pricing) were withdrawn on or after Nov. 7.
The transfers were made "with the intent to hinder, delay or defraud FTX US’s present or future creditors," the filing said.
Bankman-Fried is currently in jail preparing for his trial, scheduled to start on Oct. 3. On Thursday, an appeals court rejected his attempt to get out of jail before the start of the proceedings.
UPDATE (Sept. 22, 9:13 UTC): Adds previous clawback attempts in fourth paragraph.
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