Trouble deepens for FTX Series B Investors and the former team of bankrupt lending protocol Celsius as they fight more legal battles.
The 2022 bear market consumed some of the largest crypto firms, such as the FTX exchange and Celsius. The lending protocol, Celsius filed for bankruptcy in Jul. 2022. FTX went bankrupt in Nov. 2022.
Billions of dollars in investors’ capital are stuck in these firms as they go through bankruptcy proceedings. On the other hand, these protocols’ former core team members are fighting various lawsuits from frustrated investors.
FTX Series B VCs Accused of Hyping Project
According to a recent Bloomberg article, investors have filed a class action lawsuit against FTX Venture Capitalists (VC) for promoting the legitimacy of the exchange.
The firms, Sequoia Capital, Thoma Bravo, and Paradigm, invested $900 million in FTX in a Series B round, along with 60 other investors. The class-action lawsuit alleges the VC firms added an “air of legitimacy” to FTX.
Sequoia even published a 14,000 words article, “Sam Bankman-Fried Has a Savior Complex—And Maybe You Should Too,” on the FTX founder. The VC firm later deleted the article after the collapse of the exchange.
The complaint reads, “As a result of defendants’ significant investments in the FTX entities, each was incentivized to leverage their professional reputations and media outreach capabilities to portray FTX as a trustworthy and legitimate crypto exchange.”
Former Core Celsius Team Generated Loss of Over $1 Billion
Along with FTX VCs, the former directors of Celsius are in legal trouble for fraud, recklessness, gross mismanagement, and self-interested conduct, according to a court document. The list of former directors includes the co-founder, Alexander Mashinsky, Shlomi Daniel Leon, and Hanoch Goldstein. It also includes various other CXOs and the wife of former CEO, Kristine Mashinsky.
According to the complaint, former directors’ caused the firm a loss of over $1 billion in a year. Furthermore, it is alleged they inflated the price of CEL tokens with costumer’s money and secretly sold tens of millions of tokens.
The plaintiff seeks to prove and recover the damage amount at the trial. At the same time, Celsius tweeted that it has started notifying eligible users for withdrawal reopenings.
The case is listed as Rabbitte v. Sequoia Capital Operations LLC, 23-cv-00655, U.S. District Court, Northern District of California.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.