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Centralization of FTX Cryptocurrency Exchange Lawsuits To Be Considered by JPML on May 25
The U.S. Judicial Panel on Multidistrict Litigation (JPML) will hear oral arguments later this month to decide whether to centralize all FTX cryptocurrency exchange lawsuits before one federal judge, who would oversee the coordinated pretrial proceedings for all claims brought by investors over the exchange’s ollapse.
The FTX cryptocurrency exchange, which was launched in May of 2019 by Sam Bankman-Fried and Gary Wang, quickly gained popularity and became the third largest crypto exchange by volume by June 2021. FTX handsomely paid professional athletes such as Tom Brady, Steph Curry and others to promote the use of their mobile platform as the go-to crypto exchange, and encouraged investors to use the platform.
However, after only three years, millions of cryptocurrency investors around the world using FTX exchanges fell victim to what is being considered the largest and most sophisticated Ponzi scheme ever seen, in which tens of billions of digital assets in currencies such as Bitcoin, Ethereum and others vanished, virtually overnight.
FTX Cryptocurrency Lawsuits
In early November 2022, concerns arose over FTX’s financial stability, causing many investors to rush to withdraw their funds. The rampant withdraws created a liquidity crisis for the company, prompting the exchange to halt withdrawals and ultimately file an emergency Chapter 11 bankruptcy petition in Delaware on November 11, 2022.
Its founder, Sam Bankman-Fried, an outspoken cryptocurrency advocate, resigned shortly after. However, evidence arose soon after that Bankman-Fried had been freely transferring FTX investors’ money into his Alameda Research investment firm to use for trading, which lost massive amounts of money on risky investments. It is illegal to use investors’ funds this way, and Bankman-Fried has since been arrested and faces numerous criminal charges.
The events and actions by the exchange have now left upward of five million investors stranded and without access to their digital assets, which could be tied up in a lengthy bankruptcy process. To further complicate matters, the day after FTX filed for bankruptcy, the company claimed it had been hacked, resulting in the loss of $400 million, which has raised additional questions in several of the lawsuits over who could have abused the client funds.
Since the collapse, a number of FTX fraud investigations have been launched by lawyers and regulators, and investors are pursuing class action lawsuits and individual claims, indicating that FTX entities shuffled customer funds amongst their affiliated entities to pay other debts in an attempt to maintain the appearance of liquidity.
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Following the FTX exchange collapse, lawyers are pursuing FTX settlements from a number of companies and entities on behalf of investors who lost money.Learn More About this Lawsuit See If You Qualify Now >
Given common questions of fact and law raised in cryptocurrency exchange lawsuits currently pending in U.S. District Courts nationwide, several plaintiffs filed a motion to transfer with the U.S. Judicial Panel on Multidistrict Litigation (JPML) in February, requesting the growing number of FTX lawsuits be centralized before one judge for coordinated pretrial proceedings, as each of the cases involve parties who claim the now bankrupt cryptocurrency exchanges stole their digital assets and blocked them from making withdrawals.
In the motion, plaintiffs called for the complaints to be consolidated in the Southern District of Florida.
The JPML issued a Notice of Hearing Session (PDF) on April 14, announcing that it would hear oral arguments on centralization of FTX cryptocurrency exchange lawsuits on May 25 at the James A. Byrne U.S. Courthouse in Philadelphia.
According to the notice, there are currently eight FTX class action lawsuits filed, with five in the Northern District of California, and three in the Southern District of Florida.
If consolidation is approved for the FTX collapse lawsuits, it is expected that the U.S. District Judge appointed to preside over the proceedings will select a small group of representative “bellwether” cases for early trial dates, to help gauge how juries are likely to respond to certain evidence regarding the mounting allegations against the failed cryptocurrency exchange.
While the outcomes of these bellwether trials will not be binding on other plaintiffs, they may help drive the parties toward settlements that would avoid the need for potentially hundreds of eventual individual class action trials to be held.
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