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FTX: number of class action lawsuits against SBF reaches seven

By Darius McQuaid

12:34, 9 December 2022

 Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee at Rayburn House Office Building on Capitol Hill 8 December, 2021 in Washington, DC
Since the collapse of FTX, Bankman-Fried has been accused of lying, fraud and theft - Photo: Getty Images

Sam Bankman-Fried is now a defendant in seven class action lawsuits after the collapse and bankruptcy filing on 11 November 2022 of FTX, the cryptocurrency derivatives exchange he founded and led.        

Since the collapse of FTX, Bankman-Fried has been accused of lying, fraud and theft, which, it is claimed, played a part in the crypto company where he was CEO filing for bankruptcy.

BTC to USD 

The seven cases

On 7 December, a class-action lawsuit brought by Gregg Podalsky and four other individuals who were also FTX customers accused Bankman-Fried and celebrities who were part of the platform’s adverts and who promoted the company, of fraudulently inducing “unsophisticated investors” into purchasing unregistered securities in the form of yield-bearing accounts (YBAs), resulting in customers losing billions of dollars.  

Tom Brady, an NFL quarterback for the Tampa Bay Buccaneers who was was a brand ambassador for FTX, and Stephen Curry, three-time National Basketball Association (NBA) champion and two-time NBA Most Valuable Player, who was also a global ambassador for, and shareholder in, FTX, were named in the lawsuit. Curry plays for the NBA team the Golden State Warriors.

On 5 December, Michael Elliott Jessup brought a class-action lawsuit against Bankman-Fried and Caroline Ellison, the former CEO of Alameda Research, the quantitative crypto trading firm founded by Bankman-Fried, plus other FTX executives, accusing them of fraud, unjust enrichment and conversion.    

Unjust enrichment is when one person is enriched at the expense of another in circumstances that the law sees as unjust. Conversion is an intentional tort which occurs when a party takes the chattel property of another with the intent to deprive them of it.

Jessup alleged that FTX transferred assets to Alameda Research without the consent to do so, which constitutes conversion.

On 2 December, Russell Hawkins, an FTX customer who held funds on the exchange filed a class action lawsuit in California against Bankman-Fried and other FTX executives. Hawkins said this was on behalf of those in a similar situation and alleged that customers were misled by unfair and disruptive practices.

ETH/USD

3,441.22 Price
-1.290% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

DOGE/USD

0.13 Price
-0.150% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

65,855.25 Price
-0.100% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

SOL/USD

174.23 Price
-0.460% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

On 23 November, Stephen Pierce filed a class action lawsuit again in California accusing Bankman-Fried of being “one of the great frauds of history,” and alleging that he “and his inner circle treated those assets as a slush fund to fund their own proprietary investments and a variety of personal boondoggles.”    

Pierce believes the Corrupt Organizations Act (RICO) has been violated.

On 21 November, FTX customer Sunil Kavuri filed a class action lawsuit in Florida similar to Podalsky v Bankman-Fried, as the defendants listed are Bankman-Fried and celebrities who endorsed or promoted FTX.

Kavuri also alleged that FTX was promoting unregistered securities which were fraudulently presented as securities in an effort to attract customers and generate interest.

On 20 November, Elliot Lam, a resident in Hong Kong and FTX customer filed a class action lawsuit in California and alleged that Bankman-Fried, Ellison and the Golden State Warriors whose official crypto platform was FTX, violated California’s false advertising and unfair competition laws and also committed fraudulent concealment and civil conspiracy.

Finally on 15 November, Edwin Garrison filed a class action lawsuit in Florida and alleged that FTX’s YBAs were illegally offered securities.

Garrison stated that FTX was engaged in a “fraudulent scheme” that intentionally took advantage of “unsophisticated investors.”

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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