Bankrupt crypto exchange FTX and its sister firm Alameda Research have sued crypto platform KuCoin for failure to turn over assets belonging to Alameda. In the lawsuit filed before the US Bankruptcy Court for Delaware, FTX alleged that over $50 million of Alameda funds are being held in a KuCoin account.
According to the filing, the FTX bankruptcy estate has explored several ways to get KuCoin to return the Alameda Research funds, but all efforts have failed. It noted that KuCoin locked the account in November 2022, when the FTX bankruptcy proceeding started.
It said:
“Despite repeated outreach from the Debtors through a wide range of approaches,KuCoin has refused to cooperate with the Debtors’ requests and continues to wrongfully withhold the Debtors’ property.”
Meanwhile, FTX liquidators noted that the first request for the return of the funds happened on November 16, 2022, when the CEO of the bankrupt exchange, John Ray, wrote a letter to the CEO of KuCoin. Since then, it has made concerted efforts, including contacting KuCoin external counsels.
With the FTX now resorting to legal action, the bankrupt exchange is seeking the court to order the turnover of assets in its Alameda account and award actual and punitive damages against KuCoin for its actions. There are speculations as to why KuCoin has failed to return the funds. Some believe the offshore exchange might have kept some of its assets with FTX and lost it in the collapse, forcing it to hold on to Alameda Research funds.
Two years after bankruptcy, FTX is still the subject of legal battles
The recent lawsuit adds to the several legal proceedings in which the bankruptcy estate has been involved since its collapse. While most of these cases are efforts to recover or claw back funds from other entities, there are concerns that they may further delay the payout to creditors.
Earlier this month, the bankruptcy court approved the exchange’s repayment plan. The plan’s approval means that FTX can now repay customers holding $50,000 and below on the exchange at the time of bankruptcy, making up 98% of all credit types. However, the plan’s effective date has yet to be determined, leaving creditors to wait again.
Some creditors are already appealing the court’s confirmation of the Bankruptcy plan. Popular creditor Sunil Kavuri and two others disclosed that they had filed a notice of appeal a few days ago, but the statement of issues of appeal will not be filed until early November.
Meanwhile, some creditors are dissatisfied with the FXT’s recent settlement with ByBit. The exchange had sued ByBit to claw back the $327 million withdrawn before its bankruptcy, but it chose to settle for a $228 million—$175 million refund and ByBit trading arm Miranda buying FTX’s BIT tokens for $53 million.
FTX has described the settlement as a success, with some creditors noting that this could mean more funds for the exchange to pay out. However, some believe it is a bad deal. FTX Historian on X claimed the deal does not benefit creditors, noting the ambiguity of using “stakeholders” as beneficiaries. They claim this could imply that a significant portion of the settlement would not get to creditors.
The X user also noted that the settlement outcome is far below the $1 billion that FTX had demanded in its lawsuit, implying that FTX debtors did not negotiate well. Additionally, the FTX Historian observed that FTX held 100 million BIT tokens valued at $340 million when the petition was filed initially and is now worth $670 million, but the settlement does not provide any major returns on these tokens.
All five FTX executives might be in jail by the end of the year
Meanwhile, FTX executives are also getting jail terms for involvement in the collapsed exchange. So far, three of the five executives have been sentenced and are currently serving jail terms. These include former CEO Sam Bankman-Fried, who is serving 25 years, former Alameda Research CEO Caroline Ellison, who got 2 years, and former co-CEO Ryan Salame, with seven and half years.
The former engineering director Nishad Singh is expected to be sentenced on October 30, leaving only FTX co-founder Gary Wang who is scheduled for sentencing by November 20, 2024. Like all other executives apart from Bankman-Fried, Singh and Wang also pleaded guilty to fraud charges.
Source: https://www.cryptopolitan.com/ftx-takes-kucoin-to-court-in-effort-to-reclaim-50m-held-in-alameda-account/