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The Courts

FTX Customers File Class Action To Lay Claim To Dwindling Assets (reuters.com) 44

Posted by BeauHD from the good-luck dept.
An anonymous reader quotes a report from Reuters: FTX customers filed a class action lawsuit against the failed crypto exchange and its former top executives including Sam Bankman-Fried on Tuesday, seeking a declaration that the company's holdings of digital assets belong to customers. FTX pledged to segregate customer accounts and instead allowed them to be misappropriated and therefore customers should be repaid first, according to the lawsuit filed in U.S. Bankruptcy Court in Delaware. "Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda," said the complaint.

The proposed class, which wants to represent more than 1 million FTX customers in the United States and abroad, seeks a declaration that traceable customer assets are not FTX property. The customer class also wants the court to find specifically that property held at Alameda that is traceable to customers is not Alameda property, according to the complaint. If the court determines it is FTX property, then the customers seek a ruling that they have a priority right to repayment over other creditors.
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FTX Customers File Class Action To Lay Claim To Dwindling Assets More

FTX Customers File Class Action To Lay Claim To Dwindling Assets

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  • Make the payout in crypto.

  • Lawyers win. Gamblers lose. (Score:3, Insightful)

    by gavron ( 1300111 ) on Wednesday December 28, 2022 @09:42AM (#63163354)

    https://en.wikipedia.org/wiki/... [wikipedia.org]

    When you invest, you're buying shares of something. That's not crypto-anything.
    Nobody invested in crypto-anything.

    When you're gambling, you're buying nothing much today hoping someone will buy it from you for MORE tomorrow. That is exactly crypt-everything.
    Everyone who ever took real money, poo-pooh'd it as "fiat money" and then bought meaningless crap called Crypto-whatever... they gambled. They lost.

    If you "invested money" then you have something. If you don't, you were gambling, and now, it's gone. Sue all you want. You'll get nothing. Lawyer get rich, and that centralized government you hate so much... there's your venue to sue.

    No help for the stupids.

    • Re: (Score:2)

      by dbialac ( 320955 )
      That's not really the case in this case. This is a situation where you bought into something that was a digital currency and then the person who was supposed to hold your currency instead stole it and then gifted it to himself and his wife. Metals work much the same way, and what happened here can be demonstrated by this: you buy a metal hoping its value goes up, you own it and the holding entity instead steals it for itself and uses it as though it is its own. You have two factors here: the value of the me
      • Between now and the beginning of crypto, can you tell me how many regulated metal investments have resulted in the board of directors simply taking all the money given to them to fund their lifestyle?

        • Between now and the beginning of crypto, can you tell me how many regulated metal investments have resulted in the board of directors simply taking all the money given to them to fund their lifestyle?

          Probably not many, but sketchy stuff still sometimes happens.

          https://www.thisismoney.co.uk/... [thisismoney.co.uk]

          • That does not seem like the equivalent of people just taking investors money, with nothing to actually back it. It sounds like the market just went bad.

        • Between now and the beginning of crypto, can you tell me how many regulated metal investments have resulted in the board of directors simply taking all the money given to them to fund their lifestyle?

          Bre-X gold mine fraud. [wikipedia.org]

          • And how many crypto things turned out to be scams, or so poorly run that they were probably scams?
          • Also, did you not understand the part about "between now and the beginning of crypto"?

            • Crypto is just another in a long line of ponzi schemes leaving bag-holders holding the bag.

              Same as pump-and-dump scams.

              To even try to claim that crypto is somehow different "because blockchain" "because defi" "because unregulated" is what the latest group of scammers depends on. "This time it's different" - same as all the previous times and all the previous scams.

              There is nothing about crypto scams that is unique or new.

              • No one said it was unique or new. The point is that it IS unregulated. That's the problem. Ponzi schemes are regulated - they are illegal. That is regulation.

                Crypto is merely reinventing all the problems of an unregulated landscape of scams that we've all seen before, precisely because it is unregulated against all the kinds of fraud that we have collectively learned from.
                • There have been plenty of ponzi schemes in regulated industries, Here's a list [cnn.com]

                  #5 - Scott Rothstein: Lawyer (a regulated profession) $1.2 billion

                  #7 - R Allen Stanford - selling fake certificates of deposit (securities fraud) $7 billion

                  #8 - Bernie Madoff - stock and securities fraud - $20 billion.

                  And then there's Enron ...

                  • And how many in crypto now, in its short lifetime?

                    Do you not understand the concept that one number is bigger than another, especially given the number of years?
                    • Taking into account inflation, both Madoff and Enron make the current crypto scammers look like small potatoes. Especially since both Madoff and Enron were in regulated industries.

                      Besides, only fools bought into crypto. Anyone with any brains realized at the outset it was worthless.

      • Re: (Score:1)

        by gavron ( 1300111 )

        You are correct, except for the one part where METAL is a thing and it EXISTS and HAS VALUE.

        So when you buy a metal (e.g. Gold, Silver, etc.) you're REALLY investing in something. Sure, that guy shouldn't be mingling your coins with the other stuff let alone taking it let alone using it as collateral, and I'm with you 100% on that.

        But when you "buy crypto-[stuff]" you're not "investing" in anything. It's not a something. It's a nothing. I say "you" but I mean "Hey those people who do this" they think th

        • "I just want to say two words to you. Just two words. Cattle futures." - Hillary Clinton

        • Re: (Score:2)

          by DavenH ( 1065780 )
          Most of the points are well made but this has no justification:

          HAS VALUE.

          "Value" means that which is demanded. It's not intrinsic; there's absolutely no such thing as intrinsic value. You need someone to want your metal for it to have value. If they stop wanting it, you cannot do anything with it. Industrial uses of precious metals have a value too, but pennies on the dollar. So you're most certainly still exposed to what other people want.

          Now I'll give you a real justification: these precious metals will always be

          • Re: (Score:2)

            by gweihir ( 88907 )

            Industrial uses of precious metals have a value too, but pennies on the dollar.

            Not that bad actually. Gold, for example, is frequently estimated as having about half of its market-price in actual industrial value. This is plausible; Gold still gets used in industrial applications, just not quite as often as it probably should. Silver is about the same. Platinum seems to have a larger gap and it is mostly used when there are no alternatives.

    • Re: (Score:3)

      by gweihir ( 88907 )

      No help for the stupids.

      Indeed. The "Greater Fool Theory" that explains the whole thing nicely and clearly is apparently from 1973. These people are not only stupid, they are willfully ignorant, i.e. they are stupid by choice and they are entirely doing it to themselves. I find it exceptionally hard to have any compassion for such people.

  • Is there anything official in writing on this "Pledge".

    Probably not, this whole thing is sketchy, dodgy, skeevy, from the get-go. It's vapor in/vapor out.

    This is playing out exactly the way crypto will play out.

    Do y'all have your Trump NFT Trading cards yet? Only 99 dollars each card.

    • Link to filing (Score:4, Informative)

      by ISayWeOnlyToBePolite ( 721679 ) on Wednesday December 28, 2022 @11:56AM (#63163672)

      Is there anything official in writing on this "Pledge".

      Probably not, this whole thing is sketchy, dodgy, skeevy, from the get-go. It's vapor in/vapor out.

      Complaint https://restructuring.ra.kroll... [kroll.com]
      Skimming thru it I find:

      102. FTX US also provided each of its U.S. Customers with the “FTX.US User
      Agreement” – between U.S. customers and West Realm Services – which made it clear that both
      cryptocurrency and cash was held exclusively for the benefit of customers and title to any assets
      remained with the customers:
      * As part of your FTX.US Account, FTX.US provides qualifying users access
      to accounts for you to store, track, transfer, and manage your balances of
      cryptocurrency and/or dollars or other supported currency. All
      cryptocurrency or dollars (or other supported currencies) that are held in
      your account are held by FTX.US for your benefit.
      * Title to cryptocurrency represented in your FTX.US Account shall at all
      times remain with you and shall not transfer to FTX.US.
      * FTX.US does not represent or treat assets in your FTX.US Account as
      belonging to FTX.US.
      * Your FTX.US Account allows you to hold and transfer US dollars which
      are held by FTX.US for your benefit at U.S. banks. . . . To the extent you
      hold USD fiat balances (and such balances are not held in stablecoins or
      other investments), those fiat balances are held in customer omnibus
      accounts at FDIC-insured banks (Silvergate Bank and Signature Bank for
      customers of the FTX.US, and Evolve Bank & Trust for users of our virtual
      accounts, as of August 2022).

      103. FTX.com likewise provided its “FTX Terms of Service” – between non-U.S.
      Customers and FTX Trading – which also made it clear that the title and ownership of customers’
      cryptocurrencies remained with the customers and could not be loaned to FTX Trading (or
      Alameda):
      * Title to your Digital Assets shall at all times remain with you and shall not
      transfer to FTX Trading.
      * None of the Digital Assets in your Account are the property of, or shall or
      may be loaned to, FTX Trading; FTX Trading does not represent or treat
      Digital Assets in User’s Accounts as belonging to FTX Trading.
      * You control the Digital Assets held in your Account. At any time, subject
      to outages, downtime, and other applicable policies (including the Terms),
      you may withdraw your Digital Assets by sending them to a different
      blockchain address controlled by you or a third party.

      • a few lies:

        * FTX.US does not represent or treat assets in your FTX.US Account as belonging to FTX.US.

        They most certainly did,

        None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading.

        * You control the Digital Assets held in your Account. At any time, subject to outages, downtime, and other applicable policies (including the Terms), you may withdraw your Digital Assets by sending them to a different blockchain address controlled by you or a third party.

        We saw how that wasn't true either.

      • Is there anything official in writing on this "Pledge".

        Probably not, this whole thing is sketchy, dodgy, skeevy, from the get-go. It's vapor in/vapor out.

        Complaint https://restructuring.ra.kroll... [kroll.com] Skimming thru it I find:

        Thanks much. Okay - that lad is in trouble.

  • 0.000001% of $0 is how much again? (Score:5, Insightful)

    by chas.williams ( 6256556 ) on Wednesday December 28, 2022 @10:40AM (#63163468)
    Splitting $0 across a million investors isn't going to amount to a cup of coffee at McDs.
    • Your mistake is that you're thinking in proper mathematics. You're not thinking in terms of cryptodefi mathematics. Cryptodefi mathematics is the science of making money out of thin air, in order to combat the governments' practice of printing money.

      In the cryptodefi world, $0 divided by a million investors gives $2million per investor.

    • SBF owns a mansion and a yacht, and a lot of other random stuff. After they sell everything, it might come to a billion dollars.
      Allegedly, the creditors are owed a few billion, the depositors are owed ten billion and the investors are owed some billions too.
      Sure, it's going to be pennies on the dollar, but if whoever is at the front of the line is going to get those pennies and everyone else is going to get nothing.

    • Re: (Score:1)

      by CEC-P ( 10248912 )
      I think you're undervaluing the 10000069 shitcoins and garbage tokens they can maybe recover, worth at least 1 penny US, and a hand written note, in crayon, from Sam, apologizing for investing all their money in shitcoins and a a meth head Harry Potter fan. That's at least a fiver on eBay.

  • This will reduce the customers' funds and enrich the lawyers. Chapter 11 protects the debtors from these lawsuits with a view to restructuring, rebuilding or selling (for the best price) the company. The results of that operation can form the basis for paying creditors (in a well-recognized order), either in fiat, crypto or equity in the restructured entity or some blend.

    Suing at this point (whilst Ch11 is in place) wastes time and money. It will probably annoy the judge (since their domain is being threate

  • US and Ukrainian politicians have gobbled up that money long ago.

  • ... is like pledges of abstinence: One of the largest reasons of teenage pregnancies. Behind both is withholding of critical information from people that need it, lying, general stupidity and all to often, malice.

  • "Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda," said the complaint.

    The Customers are unsecured creditors however. They didn't keep hold of the asset they were promised in return, what can you say? That's not a secured debt.

    Yeah they claimed to have separated customers funds, but the customers were defrauded. They didn't put that cash in

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