Alameda Research, once a popular trading firm associated with FTX, has filed a legal complaint against the cryptocurrency exchange KuCoin to retrieve over $50 million in assets currently locked on KuCoin’s platform.
The move comes as part of the ongoing efforts to manage FTX’s bankruptcy case, following the company’s high-profile collapse in November 2022.
The backdrop to this dispute lies in the fact that FTX, a major cryptocurrency exchange, filed for bankruptcy in late 2022 after facing severe liquidity issues. This bankruptcy was extensive, impacting both FTX and its affiliates, including Alameda Research.
These entities are now in the process of undergoing Chapter 11 proceedings in the United States, to assess and liquidate their assets to pay off creditors.
In a filing dated October 28, 2023, Alameda Research took the matter to the United States Bankruptcy Court for the District of Delaware, the court overseeing FTX’s Chapter 11 case. The complaint alleges that KuCoin has refused multiple requests to release the assets, even though several communications have been made to that effect.
This prolonged hold-up has prevented Alameda Research from accessing funds essential for settling debts and obligations under the bankruptcy case. The situation is particularly notable due to the drastic change in the value of the assets involved.
When initially frozen by KuCoin, these assets were worth an estimated $28 million. However, due to market volatility, their current value has surged to over $50 million. This increase in valuation amplifies the stakes of the dispute, as these assets represent a significant portion of Alameda’s recoverable resources.
Three weeks ago, a Judge approved the recovery process for FTX after a series of litigations between FTX and those it owes. The plan disclosed that 98% of creditors will receive a minimum of 118% of their claims in cash.
Additionally, FTX investors suspended their legal action against Sullivan & Cromwell, the law firm they initially intended to hold accountable for its advice to FTX before the company’s collapse. According to the investors, the law firms offered the wrong advice which led to its collapse in 2022.