FTX's Legal Blow Against NFT Stars and Delysium
In the Heat of the Fray
FTX Insolvency Files Legal Action Against NFT Platform and Artificial Intelligence Gaming Service Over Contract Disputes
In a bold move, the FTX Estate has taken legal action against NFT Stars and Kurosemi Inc., operating as Delysium. The lawsuits, filed in Delaware's bankruptcy court, accuse both parties of breaching contracts and violating bankruptcy protections by failing to deliver tokens promised under investment agreements with Alameda Research's venture arm, Alameda Ventures.
Suing for Recovery
The complaints aim to compel these companies to return tokens obtained through Simple Agreements for Future Tokens (SAFTs), worth 83 million SIDUS, 831,000 SENATE, and 75 million AGI tokens, along with damages and sanctions. The FTX Estate encourages token and coin issuers to return assets rightfully belonging to FTX, adding they are prepared to initiate litigation if diplomatic paths prove unfruitful.
A Tumultuous Past
FTX's legal action is the latest attempt to recover assets following its collapse in November 2022. Once a major player in the cryptocurrency world, FTX filed for bankruptcy after revelations surfaced that executives had misused around $8 billion in customer funds to cover risky bets made by Alameda Research.
The Conviction and Restructuring
The collapse triggered industry-wide scrutiny, resulting in losses for customers and investors. Sam Bankman-Fried, FTX's founder and former CEO, was convicted of fraud and conspiracy charges and sentenced to 25 years in prison. FTX has undertaken a restructuring plan to repay creditors, part of which involves collecting funds held by other companies believed to belong to FTX.
Breach of Contract and Bankruptcy Protections
The court documents allege that both NFT Stars and Delysium breached contracts by failing to transfer the tokens despite repeated attempts to resolve matters outside of court. FTX seeks immediate return of the assets, damages for breach of contract, and sanctions for violations of bankruptcy protections, including those related to the automatic stay under U.S. bankruptcy law.
The Case Against NFT Stars
FTX paid $325,000 in November 2021 for rights to 1.35 million SENATE tokens and 135 million SIDUS tokens. While NFT Stars initially delivered some tokens, it failed to fulfill further transfers following FTX's bankruptcy filing. NFT Stars now owes over 831,000 SENATE tokens and 83 million SIDUS tokens, according to FTX, due to breaches of contract and violation of the automatic stay.
The Case Against Delysium
In January 2022, Alameda Ventures paid $1 million for the right to receive 75 million AGI tokens. However, Delysium extended the vesting schedule unilaterally for 48 months and refused to distribute any tokens, citing FTX's bankruptcy as a reason. Delysium's actions are perceived as violating contractual agreements and FTX's recovery efforts under bankruptcy law.
Looking Forward
These lawsuits represent an essential step for FTX in its recovery strategy and effort to return marooned assets to creditors. It serves as a warning to other token and coin issuers to cooperate in returning assets or face the possibility of legal action. In the coming months, we may see further legal action as FTX continues its relentless pursuit of financial restitution.
Written by Sebastian Sinclair
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- FTX's legal action against NFT Stars and Kurosemi Inc. (operating as Delysium) accuses both parties of breaching contracts and violating bankruptcy protections in regard to Alameda Research's venture arm, Alameda Ventures.
- Complaints filed by the FTX Estate aim to recover 83 million SIDUS, 831,000 SENATE, and 75 million AGI tokens through a return of assets, damages, and sanctions.
- FTX encourages token and coin issuers to return assets rightfully belonging to the bankrupt exchange, threatening litigation if diplomatic paths are unproductive.
- In November 2022, FTX collapsed, leading to revelations of executives misusing around $8 billion in customer funds to cover risky bets made by Alameda Research.
- Sam Bankman-Fried, FTX's founder and former CEO, was convicted of fraud and conspiracy charges and sentenced to 25 years in prison.
- The court documents allege that NFT Stars and Delysium breached contracts and violated bankruptcy protections, hampering FTX's recovery efforts.
- NFT Stars failed to fulfill token transfers following FTX's bankruptcy filing, resulting in a debt of over 831,000 SENATE tokens and 83 million SIDUS tokens.
- Delysium's actions, such as extending the vesting schedule and refusing to distribute tokens, are seen as contractual violations and an obstruction to FTX's financial restitution in 2023 and beyond.
