Late on Thursday this week, FTX sued former Salameda employees and their mothers—Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong— alleging that they fraudulently withdrew their assets in the days leading to the company’s meltdown.
Misuse of Personal Ties
According to the filing, during the span of 90 days before the November 11, 2022 bankruptcy filing, the defendants allegedly misused their personal ties with FTX. They prioritized their asset withdrawals that included preferential transfers which “are avoidable under the Bankruptcy Code.”
The filing cites the messages on communications application Slack, which reveal that Matthew Burgess contacted other FTX employees to “push out” certain pending withdrawal requests from one of the accounts belonging to Michael Burgess in the FTX US exchange while falsely representing the account as his own.
The transfers were executed just hours before FTX suspended withdrawals on November 8, 2022. Of the total $157.3 million (valued as of August 31, 2023), over $123 million was withdrawn on or after November 7. FTX believes that these transfers were made with the intention to “hinder, delay or defraud FTX US’s present or future creditors,” the filing reads.
The filing also details the heavy profits that the defendants made from trading funds that they managed to withdraw months before the FTX collapse. For instance, Darren Wong is believed to have amassed over $70 million in gains from FTT trades on FTX.com, with around $30 million of these earnings realized shortly before FTX’s bankruptcy filing.
FTX Files Lawsuit Seeking Payment Recovery
FTX’s bankruptcy estate has been actively seeking to recover payments from various related parties. It has pursued claims against Sam Bankman-Fried, his parents, FTX executives, FTX’s philanthropic and life science divisions. The estate has also targeted Genesis Global Capital, which is owned by Digital Currency Group, and is now bankrupt.
In January, FTX reported recovering over $5 billion in different assets. It’s worth mentioning that the bankrupt company owed its customers $8.7 billion in June.