FTX Ramps Up Legal Pressure on Uncooperative Token Issuers

In a major step, FTX is ramping up legal pressure against uncooperative token issuers or counterparties who are stonewalling asset recovery efforts.

Major cryptocurrency exchange FTX is increasing legal pressure on uncooperative token issuers or counterparties who are stifling efforts to recover assets, the firm said in a statement on Wednesday.

The exchange named two firms, NFT Stars Ltd. and KUROSEMI INC. (d/b.a Delysium), who have allegedly gone silent over delivering contractually entitled tokens.

"We are ramping up efforts to recover assets on behalf of FTX's creditors. Despite our best efforts to resolve matters amicably, two issuers, NFT Stars and KURO, have thus far refused to engage in good faith and cooperate with the FTX Recovery Trust.

"We urge token and coin issuers to return assets that rightfully belong to the exchange, and are prepared to pursue litigation where necessary.

"Our team continues to work tirelessly to maximize recoveries for the FTX Estate and return funds to creditors, including by filing two complaints against issuers who have repeatedly ignored our attempts to engage," FTX said.

The FTX Recovery Trust is represented by Sullivan & Cromwell LLP as legal counsel and is aided by Alvarez & Marsal North America, LLC as financial advisor, Perella Weinberg Partners LP as investment banker, Quinn Emanuel Urquhart & Sullivan, LLP as special counsel, and Landis Rath and Cobb LLP as Delaware counsel.

FTX is also in the process of contacting numerous other token and coin issuers regarding its assets and has warned of additional suits against non-responsive parties. It urges these parties to respond within a timely manner to avoid litigation.

This legal development comes as the crypto exchange is preparing for a major payout to creditors, with $16 billion in cash set to be distributed on the 30th of May.

In other news, small creditors of bankrupt cryptocurrency exchange FTX have already started receiving payments, according to a report by the Wall Street Journal. The report states that the payout is part of an effort to return funds to those affected by the exchange’s dramatic collapse in November 2022.

The report adds that the exact amounts individual creditors will receive will depend on the finalized claims process. However, this large-scale disbursement marks a huge step forward in the complex FTX saga.

As one of the largest cryptocurrency exchanges, FTX’s downfall sent shockwaves through the industry. Its bankruptcy case is now one of the biggest in U.S. history.