FTX Asks Judge to Stop Class Action Complaints

FTX reportedly aims to stop class action complaints and other lawsuits that target company insiders and venture capital firms accused of being involved in the collapse of the cryptocurrency exchange.

The company asked a U.S. judge Tuesday (June 4) to stop this outside litigation, saying it puts at risk its efforts to repay customers impacted by the collapse, Reuters reported Tuesday.

By selling assets and filing lawsuits to claw back money paid out before its collapse, FTX has recovered some $16 billion to repay customers, according to the report.

The outside litigation could put these funds at risk, the company told the judge, per the report.

FTX also said that the class action lawsuits aim to collect legal fees “despite having to date provided next to no monetary benefit” for victims of the collapse, according to the report.

Adam Moskowitz, a lead lawyer for the plaintiffs, said in the report: “Our goal is to provide relief for all FTX victims and we appreciate all parties that are helping our efforts.”

FTX said May 7 that it has pulled together assets worth enough to pay back 98% of its creditors 118% of what they are owed. The remaining 2% would get back 100% of their claim under a plan that still needs approval from a federal judge.

“FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the company said at the time in a news release.

In another legal action related to the collapse of FTX, it was reported in April that a group of FTX investors agreed to drop legal claims against FTX co-founder and former CEO Sam Bankman-Fried in exchange for his cooperation in their suits against other defendants.

The other defendants include various celebrities paid to promote the exchange when it was flying high. Even before criminal charges were filed against Bankman-Fried, a group of investors sued FTX’s celebrity endorsers for securities law violations, alleging that they failed to conduct proper due diligence and helped further the exchange’s fraud.