Onusz v. West Realm Shires Inc., et al., No. 22-50513-JTD (Bankr. D. Del.)

On December 27, 2022, E&C filed an adversary class action complaint against the FTX Group, its senior executives and affiliates.  By filing this complaint E&C seeks, among other things, a declaratory judgment that (i) customer property held in accounts at “FTX US” (the FTX Group’s exchange for U.S. customers) or “FTX Trading” (the exchange for non-U.S. customers, also known as FTX.com) is not property of the FTX entities bankrupt estates, and (ii) customer funds held or recovered by these entities should be returned to customer victims.

The adversary complaint is brought on behalf of all FTX customers that have been unable to withdraw, access or use their funds and digital assets held at FTX (the “Customer Class”).

The action arises because the closely-knit group of young executives (the “FTX Executive Defendants”) who operated FTX, the second largest “cryptocurrency” electronic trading exchange, totally abdicated or ignored their duty to put in place adequate controls to protect customer property.  The FTX Executive Defendants – who insiders at the FTX Group confirm controlled, and were the only individuals with access and authority to transfer, customer property – intentionally used customer property to fund: (i) obligations and losses from risky strategies employed by Alameda, their entwined cryptocurrency trading firm; (ii) acquisitions and investments by FTX and Alameda to grow their personal cryptocurrency fiefdom; and (ii) their lavish lifestyles, including through more than $1.7 billion in loans from Alameda that were never repaid.

Because of the Defendants’ breaches of customer agreements, fiduciary duties and duties of care, billions of dollars in assets that were contractually required to be held safely in customer accounts were commingled with firm assets.  Even worse, according to widespread reports, up to $2 billion in customer property is missing.

By filing this action, E&C intends to protect assets belonging to the Customer Class from becoming part of the bankruptcy estates or, in the alternative, fight for customers to have priority payment of their property.

If you wish to view the adversary complaint, please click here.

The Debtors have set up a website (https://claims.ftx.com/) where you can view the scheduled valuation of your account.  Pursuant to the claim procedures, your account value on the filing date will be your recognized claim unless you dispute it.  There is a procedure on the website to dispute the claim, but to do so you will need detailed documentation.  To be clear, in order to have a recognized claim in the amount of your account balance on the date of the bankruptcy filing, you need do nothing.  However, if you wish to dispute the balance on the Debtors’ records, you need to do so through the website before the Bar Date, which is September 29, 2023 at 4:00 p.m. EST.