Investors affected by the sudden collapse of the FTX cryptocurrency exchange are advised to consult with expert lawyers.
The three-year-old fund, founded by Sam Bankman-Fried, collapsed within days of this week. The trouble started when Binance CEO Changpeng ‘CZ’ Zhao got into a Twitter spat with FTX CEO over the rule.
As of Tuesday, Zhao has ordered the liquidation of nearly $600 million of FTX tokens before agreeing to buy FTX, subject to due diligence. In the meantime, rumors of bankruptcy involving SBF’s trading company, Alameda Research, have intensified.
Within 24 hours the deal was off the table after CZ abruptly pulled out of the contract to sell the damaged stock.
The recession has since become a major financial crisis that has affected many businesses and affected millions of people. Some of the 134 entities listed in the bankruptcy filing filed by FTX yesterday – a filing that led to the resignation of Sam Bankman-Fried as CEO. The 30-year-old Californian resigned a day after issuing an apology during which he promised to repair the damage caused.
Legal teams within FTX and outside bodies have spent recent days trying to gauge the extent of the damage caused by the FTX collapse, and how far it has come. Expert lawyers are now scrambling to provide support to investors caught up in the crypto storm.
Solicitors such as Louise Abbott of Chancery Lane-based Keystone Law are advising investors to act quickly to access legal aid – especially if the terms of service on FTX’s website are states that for FTX Trading Ltd, disputes will be governed by English Law.
“It is not yet clear if these service measures will apply to customers who have lost their money, and a full review will be done on a case-by-case basis to determine if these service measures will apply in a particular case, but it is possible that they will big impact,” explained the cryptocurrency and asset recovery partner.
“Immediately after the appointment of the administrator, the powers of the directors of the company will cease and the liquidator will take over the management of the assets of the company. Generally, insolvent creditors cannot take legal action against a bankrupt or a company once a receiver has been appointed under the Insolvency Laws.
“In this case, lawyers should carefully consider the Insolvency Laws and binding Service Rules to determine whether the client’s claims for repayment fall outside the issuer’s jurisdiction (if not such client funds as company assets).”