FTX Customers Want Fraud Suits Grouped In Florida

By Lauren Berg · Listen to / read original article Law360 (February 13, 2023, 11:51 PM EST)

A group of plaintiffs who claim they were defrauded by the now-bankrupt cryptocurrency platform FTX urged the U.S. Judicial Panel on Multidistrict Litigation on Friday to consolidate all similar cases in Florida federal court.

A number of suits have been filed in the wake of FTX’s spectacular collapse late last year — most filed in California and Florida by customers who say they were ripped off by the company and its celebrity “brand ambassadors” — but they should all be consolidated in the Southern District of Florida, according to the petition filed by Edwin Garrison, Gregg Podalsky, Skyler Lindeen, Alexander Chernyavksy, Sunil Kavuri, Gary Gallant, and David Nicol.

The petitioners said they were the first in the country to file a class action following FTX’s collapse, alleging that company leaders and those paid to shill for the exchange, including Tom Brady, Shaquille O’Neal and David Ortiz, lied to consumers in a “fraudulent scheme designed to take advantage of unsophisticated investors from across the country.”

That case is already consolidated before U.S. District Judge K. Michael Moore with a related lawsuit and “is proceeding expeditiously and efficiently,” according to the petition. The petitioners said their attorneys at Boies Schiller Flexner LLP, the Moskowitz Law Firm PLLC and Mark Migdal & Hayden have been litigating these issues from the beginning and are well-positioned to lead the case for all affected FTX customers.

Because lawsuits are being filed around the country against some of the same defendants in the petitioners’ suit, as well as the FTX bankruptcy proceedings and enforcement actions brought by the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission, “consolidation and transfer to … Florida may be the best option for the panel to ensure that these cases are litigated fully, effectively, and in an orderly fashion,” the petition states.

FTX filed for bankruptcy on Nov. 11 along with more than 130 affiliates after about $65 billion in unauthorized transfers of customer funds had been made to cryptocurrency hedge fund Alameda Research — also controlled by FTX CEO Sam Bankman-Fried — to be deployed for investment and lending purposes. New CEO John J. Ray III has said in court filings that Bankman-Fried and a close circle of individuals created a back door on the FTX platform that allowed Alameda access to the customer funds at will.

More than $5.5 billion in cash and digital assets have been located and secured by FTX’s new management since taking over, with more than $400 million allegedly lost to hackers.

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Individual Cases:

The individual cases include Edwin Garrison et al. v. Bankman-Fried et al., case number 1:22-cv-23753, in the U.S. District Court for the Southern District of Florida; Julie Papadakis v. Samuel Bankman-Fried et al., case number 3:23-cv-00024; Michael Elliott Jessup v. Bankman-Fried et al., case number 3:22-cv-07666; Stephen T. Pierce v. Bankman-Fried et al., case number 3:22-cv-07444; and Elliott Lam v. Bankman-Fried et al., case number 3:22-cv-07336, all in the U.S. District Court for the Northern District of California; and Joewy Gonzalez v. Silvergate Bank et al., case number 3:22-cv-01981; Jose Tomas Sepulveda Zuleta v. Silvergate Capital Corp. et al., case number 3:22-cv-01901; and Andrawes Husary v. Silvergate Bank et al., case number 3:23-cv-00038, all in the U.S. District Court for the Southern District of California.