FTX Customers File Lawsuit Seeking Priority Repayment: What Investors Need To Know

Four customers of FTX have filed a class action lawsuit in U.S. Bankruptcy Court for the District of Delaware (where FTX's bankruptcy proceedings are taking place) demanding priority in repayment for the approximately $2 billion in missing customer funds.

The customers claim that FTX transferred the funds to closely affiliated investment fund Alameda Research in a manner that was "unlawful" and "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."

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The suit argues that retail customers, who suffered financial losses as a result of the FTX and sister company Alameda Research bankruptcy, should not have to wait in line with other creditors to recover their funds.

A committee representing unsecured creditors, comprising over 100 entities invested in the collapsed exchange and its affiliated companies who do not have collateral for what FTX owes them, has been formed.

The court filing states that "cash and assets traceable to customers, which never belonged to FTX or Alameda and do not belong to the estates, should be earmarked solely for customers, and victimized customers should likewise have priority to any other cash possessed or recovered by [the group of affiliated debtors]," The Block reported.

The co-founders of FTX and Alameda, Sam Bankman-Fried and Gary Wang, respectively, as well as former Alameda CEO Caroline Ellison, are facing multiple fraud charges.

Ellison and Wang have already pleaded guilty to criminal and civil charges.

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