FTX creditors are taking legal action against Kroll Restructuring Administration, the firm responsible for managing claims for the bankrupt crypto exchange. The class action lawsuit, filed by US-based Hall Attorneys on Aug. 20, alleges that Kroll’s mishandling of claims for FTX, BlockFi, and Genesis customers has resulted in financial harm and exposed sensitive information to cybercriminals.
The lawsuit claims that Kroll was aware of the risks associated with using emails, especially after experiencing a data breach incident in August 2023. During this breach, an unauthorized party gained access to a Kroll employee’s mobile number, allowing them to breach the firm’s systems and expose creditor data, including names, addresses, email contacts, and some FTX account balances. Despite this breach, Kroll continued to send critical notices solely via email, leaving claimants vulnerable to scams and phishing attacks.
One FTX creditor, Sunil Kavuri, shared his concerns about phishing emails becoming a daily issue for users of the defunct exchange. He even received a fraudulent message containing his full name just hours before raising awareness about it on social media.
The lawsuit also highlights how Kroll’s approach has led to verification delays, lockouts, and the loss of claims for FTX creditors. Nicholas Hall, the lead counsel on the case, is urging all FTX creditors to join the legal battle, emphasizing that the lawsuit aims to provide compensation for losses related to phishing attacks, delayed claims, and expunged filings.
In addition to monetary relief, the plaintiffs are seeking practical reforms, including the implementation of multi-channel communications through both email and First-Class Mail, status-change notifications with mandatory response periods, a manual tax-form option, and stricter security controls for account changes. They are also demanding deliverability safeguards and independent audits to enhance data protection.
This legal battle is significant for both US and Bahamas customer-creditors of FTX, as it seeks to address the issues caused by Kroll’s handling of claims. By coming together in this class action lawsuit, FTX creditors have the opportunity to seek justice and potentially receive compensation for the damages they have suffered.