FTX Sues Former Hong Kong Affiliate Employees to Recover $157.3 Million
In Brief
Bankrupt cryptocurrency exchange FTX has taken legal action against ex-employees of Salameda, a Hong Kong-linked entity, accusing them of fraudulently withdrawing $157.3 million in assets just before FTX declared bankruptcy in November 2022.
The lawsuit alleges that the defendants gave priority to their withdrawals and exploited connections within FTX, controlling various accounts at FTX.com and FTX US.
Bankrupt cryptocurrency exchange FTX has filed a lawsuit against former employees of Salameda, a Hong Kong-incorporated entity linked to FTX.
The filing alleges Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, Darren Wong, and two companies (3Twelve Ventures and BDK Consulting) for fraudulently withdrawing assets totaling approximately $157.3 million in the days leading up to FTX’s bankruptcy on November 11, 2022.
It claims that the defendants prioritized their withdrawals and exploited connections within FTX.
According to the filing, these individuals and entities controlled various firms with accounts at FTX.com and FTX US, and they are accused of making preferential transfers during the 90-day Preference Period before the bankruptcy filing.
“Defendants Michael Burgess, Nguyen and Wong engaged in significant trading activity through their individual and affiliated corporate FTX.com and FTX US exchange accounts, averaging between approximately $100 million and $400 million in monthly notional trading volume between January and November 2022,” the filing stated.
Former FTX Employees Accused of Profiting Millions Amid Customer Withdrawals and Priority Manipulation
During the period from July 2019 to January 2022, the defendants received substantial transfers of cryptocurrency and fiat from FTX Group entities, including over 13.1 million FTT sent to Darren Wong, more than 1 million SOL sent to Michael Burgess, and nearly $4 million as “bonuses.”
They profited significantly from these transfers, with Wong receiving over $70 million from selling FTT on FTX.com, including $30 million in November 2022.
Meanwhile, FTX.com and FTX US customers were withdrawing billions of dollars due to concerns about the Debtors’ liquidity and solvency. In addition, the lawsuit asserts that the defendants manipulated FTX personnel connections to ensure their withdrawals were prioritized.
“Defendants Michael Burgess, Nguyen and Wong also raced to withdraw assets from their various individual and corporate accounts on the FTX.com and FTX US exchanges, but they had advantages over average customers… they leveraged their connections to FTX Group personnel to ensure that they would be prioritized over other customers,” the court filing read. “As part of this scheme, Defendant Matthew Burgess, a then-current FTX Group employee, enlisted other FTX Group employees to “push out” certain pending withdrawal requests from one of Michael Burgess’s FTX US exchange accounts, while misrepresenting the account to be his own.”
The legal action is part of FTX’s efforts to recover assets and payments from related parties, including former executives and entities connected to the exchange. FTX’s bankruptcy estate has been actively pursuing claims to address its substantial liabilities.
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About The Author
Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on agnec@mpost.io.
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Agne is a journalist who covers the latest trends and developments in the metaverse, AI, and Web3 industries for the Metaverse Post. Her passion for storytelling has led her to conduct numerous interviews with experts in these fields, always seeking to uncover exciting and engaging stories. Agne holds a Bachelor’s degree in literature and has an extensive background in writing about a wide range of topics including travel, art, and culture. She has also volunteered as an editor for the animal rights organization, where she helped raise awareness about animal welfare issues. Contact her on agnec@mpost.io.
