Financiers and celebrity endorsers of the failed FTX cryptocurrency exchange should face consolidated class-action lawsuits over the billions lost in the meltdown of
Venture capital and private equity firms including
While FTX sought Chapter 11 protection in Delaware in November, federal laws freezing litigation against companies in bankruptcy court don’t apply to third parties, allowing investors to take aim at people and companies that allegedly facilitated the exchange’s actions.
Gathering the suits will help take what many have described as “unwieldy cases” targeting those who aided and abetted FTX’s misdeeds and make them manageable, veteran lawyer
Such MDLs are designed to reduce costs by eliminating duplicative pre-trial document exchanges and provide a venue for test trials to weigh the value of claims. Some companies, however, criticize MDLs as a way for judges to wrongfully strong-arm settlements of suits.
Bankman-Fried is facing criminal fraud charges after federal prosecutors alleged he masterminded of one of the biggest scams in US history, fraudulently raising at least $1.8 billion despite having assured investors FTX had appropriate controls and risk management. He’s also accused of misusing customer funds at FTX to cover personal expenses and real estate purchases.
Boies and his allies urged the panel to send the nearly dozen cases to federal court in Miami, where FTX operated in the US and US District Judge
While some FTX insiders are named as defendants, none were executives or directors at the time of the bankruptcy filing, said Adam Moskowitz, a Miami-based lawyer representing FTX investors. “We were very careful in who we sued,” he said outside the hearing.
Such targeted class-actions have reaped billions in settlements from banks and other players in past big-name businesses collapses, including
The case is In RE: FTX Cryptocurrency Exchange Collapse Litigation, MDL No. 3076, US Judicial Panel on Multidistrict Litigation (Philadelphia).
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