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By Khristopher J. Brooks
December 28, 2022 / 1:19 PM / MoneyWatch
A group of FTX Trading customers is suing the bankrupt cryptocurrency exchange, alleging that its top executives stole their digital assets and purposely blocked them from making withdrawals.
California resident Austin Onusz filed a class-action lawsuit Tuesday alongside three other FTX users from the Netherlands, Turkey and the United Kingdom. The complaint names FTX founders Sam Bankman-Fried and Gary Wang as defendants as well as Caroline Ellison, former CEO of FTX’s hedge fund, Alameda Research.
Bankman-Fried and Ellison knowingly sent customer crypto funds to Alameda Research without their consent, attorneys representing Onusz allege.
“Such misconduct was in direct violation of FTX’s own customer agreements and terms of service as well as common law and basic principles of honesty and fair dealing,” states the lawsuit, which claims the class-action could encompass more than 1 million FTX customers
Under Bankman-Fried’s leadership, FTX has misplaced up to $2 billion worth of customer digital assets, the lawsuit alleges.
Onusz and the other plaintiffs said in court documents that they stored cash and digital assets on FTX’s platform but haven’t been able to complete a withdrawal since early November. FTX users who cannot access their funds should get priority status once the bankruptcy proceedings end and it’s time to divvy up the company’s remaining assets, the plaintiffs’ attorneys argue.
FTX, which has been accused of negligence and breach of contract in the lawsuit, didn’t immediately respond to a request for comment.
FTX filed for bankruptcy last month after experiencing crypto’s version of a bank run. Customers withdrew about $5 billion in a single day amid rising concerns about 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 U.S., where he was released last week on a $250 million bond. Bankman-Fried is now at his parent’s home in California while he awaits trial. The $250 million bond is believed to be the largest ever federal pretrial bond, according to federal prosecutors.
Ellison and Wang have pleaded guilty to fraud charges.
FTX’s new CEO John J. Ray III has called the company’s previous management the worst he’s ever seen in a 40-year career that includes overseeing the Enron bankruptcy. He told federal lawmakers earlier this month that FTX collapsed because the “very small group of grossly inexperienced and unsophisticated individuals” who were running the company “failed to implement virtually any of the systems or controls that are necessary for a company that is entrusted with other people’s money or assets.”
Assistant U.S. attorney Nicolas Roos said last week in U.S. District Court that Bankman-Fried “perpetrated a fraud of epic proportions.”
—The Associated Press contributed to this report.
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
First published on December 28, 2022 / 1:19 PM
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