"Claw-Back Litigation in FTX Bankruptcy FAQs: An Update" (Nov 14, 2024)

Claw-Back Litigation in FTX Bankruptcy FAQs: An Update – Morris James LLP 

 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

 

 
 
 

 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 

 


 
 


 
 

 
 
 

 
 
 
 



 

 
 

 
 

 

 
 
 
 
 
 
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 Claw-Back Litigation in FTX Bankruptcy FAQs: An Update


 
 
 
 
 
 
 
 
 
 
 
 11.14.24 
 
 
 
 
 
 
 Editor’s Note (November 14, 2024): 

 Since the publication of this article, FTX has intensified its efforts to recover assets through clawback litigation, with filings beginning in early November 2024, two years following the debtors' petition date. These actions target individuals and entities, carved out under the FTX bankruptcy plan, with specific claims in an effort to recover funds for creditors. If you've been named in one of these actions, understanding your rights and building a strong defense is essential, as failing to respond promptly can lead to potentially substantial financial judgments.

 The deadline to respond to these complaints is typically 30 days from the service date, so acting swiftly is crucial. Given the high stakes and complexity of the FTX bankruptcy case, consulting with an experienced attorney as early as possible can help you explore all available defenses. 

 Our team is here to support you through this process and protect your interests. Please contact us at 302.888.6836 or email us to discuss how we can assist in defending your assets. 

 What are the FTX bankruptcy cases?

 FTX Trading Ltd. and FTX.US, together generally known as FTX, operated a successful cryptocurrency exchange. FTX was established in 2018 by Sam Bankman-Fried and, by 2021, had become the third largest cryptocurrency exchange in the world. FTX and affiliated entities filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware on November 11, 2022 following a dramatic and highly publicized decline. Bankman-Fried has since been convicted of fraud, money laundering, and related crimes for his actions while at FTX and its affiliated company, Alameda Research Ltd.

 The FTX entities are now going through the standard processes of bankruptcy in which the assets, liabilities, debtors, and creditors of each entity are identified, and a plan is agreed for the reorganization and/or sale of the entities, and the payment of creditors, including FTX customers. This process is controlled, and approved, by the Delaware bankruptcy court

 What is claw-back litigation?

 Claw-back refers to the process by which a bankrupt entity attempts to “claw-back” or recover money or property that it paid to a creditor. A bankrupt entity can do that by either fraudulent transfer or preference claims. The bankrupt entity, in this case FTX or any of its affiliates, petitions the court to avoid such preferential or fraudulent transfers, and order that the funds are returned to the bankrupt 

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