FTX Bankruptcy Estate Sues KuCoin Over $50M in Crypto Assets

The bankruptcy estate of the cryptocurrency exchange FTX, through its sister trading subsidiary Alameda Research, has dragged its rival trading platform KuCoin to court over digital assets worth millions of dollars.

According to a document filed at the United States Bankruptcy Court for the District of Delaware, which oversees FTX’s bankruptcy, Alameda Research seeks to recover $50 million in cryptocurrencies held in KuCoin’s accounts. 

The estate also wants KuCoin to pay the cost of the lawsuit, including attorney’s fees, pre-and post-judgment interests, and punitive damages for violation of the automatic stay under Section 362 of the Bankruptcy Code.

FTX Sues KuCoin

Alameda research claims it operated a KuCoin account before it became insolvent and crashed in November 2022. The exchange account was funded, controlled, and registered in Alameda’s name.

Following the FTX Group’s bankruptcy filing, the estate found that the KuCoin account held Alameda assets worth nearly $30 million per market prices at the time. Attempts to access the funds were abortive as KuCoin had locked the account. Subsequent efforts and requests to retrieve the assets failed as KuCoin refused to cooperate with the bankruptcy estate.

“Despite repeated outreach from the Debtors through a wide range of approaches, KuCoin has refused to cooperate with the Debtors’ requests and continues to wrongfully withhold the Debtors’ property. This Adversary Proceeding seeks the turnover of these estate assets held by KuCoin,” the filing stated.

FTX’s Settlement With Bybit

FTX argued that KuCoin’s wrongful withholding of the assets deprived the estate of the value of their property and caused them to incur high costs in attempting to secure the cryptocurrencies. The crypto market has appreciated since FTX’s implosion, and the value of the assets has increased; hence, the estate is seeking cryptocurrencies worth $50 million.

“By refusing to process the Debtors’ withdrawal requests, Defendants flout one of the key purposes of the automatic stay: ‘to prevent any creditor from becoming a self-determined arbiter of what constitutes property of the estate and what actions are permitted or prohibited by the stay,'” added the estate.

The latest lawsuit comes a few days after the FTX estate agreed to settle a suit with Bybit, another rival trading firm. When the case began last year, FTX sought $953 million, but the agreement will see the firm settle for $228 million. These moves are part of efforts to recover funds for creditors and maximize their returns.