FTX founder sued over yield-bearing crypto accounts

FTX founder Sam Bankman-Fried has been sued in US court by investors alleging the company's yield-bearing crypto accounts violated Florida law, according to court papers.

The proposed class action filed late Tuesday night in Miami alleges that FTX yield-bearing accounts were unregistered securities that were unlawfully sold in the US.

When the crypto exchange faltered on liquidity concerns, US investors sustained $11 billion in damages, the lawsuit alleges.

The lawsuit seeks damages from Bankman-Fried and a number of celebrities who allegedly helped promote FTX, including National Football League quarterback Tom Brady and tennis star Naomi Osaka. 

Just days after cryptocurrency's third-largest exchange collapsed, the public is starting to get an idea of how messy FTX's bankruptcy case could be. 

READ MORE: Why did crypto exchange FTX collapse?

Users fear worst

Other crypto firms are failing as a result of FTX's unravelling, events reminiscent of the domino-like meltdowns of the 2008 financial crisis.

Users remained frustratingly in the dark about when they might get their funds back, if at all, directing much of their anger toward Bankman-Fried. 

In a court filing, FTX's lawyers said there were already more than 100,000 claims against the company and estimated that figure could grow to more than 1 million, most of them customers, once the case is complete.

The court ordered FTX to provide at least a list of the company's 50 biggest creditors by November 18. 

Violating US securities law

The lawyers said the company is in contact with the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission as well as dozens of other state, federal and international authorities, confirming earlier reports that the US government is probing the possibility that Bankman-Fried and his lieutenants violated US securities law.

FTX filed for bankruptcy protection Friday, sending tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

The Wall Street Journal reported that BlockFi, which had halted withdrawals over the weekend following FTX’s bankruptcy, is now actively considering bankruptcy and plans to lay off its staff.

READ MORE: Is Sam Bankman-Fried crypto’s JP Morgan?