Case 1:23-cv-20439-KMM Document 50 Entered on FLSD Docket 06/06/2023 Page 1 of 5
`Case MDL No. 3076 Document 138 Filed 06/05/23 Page 1 of 5
`
`UNITED STATES JUDICIAL PANEL
`on
`MULTIDISTRICT LITIGATION
`
`IN RE: FTX CRYPTOCURRENCY EXCHANGE
`COLLAPSE LITIGATION
`
` MDL No. 3076
`
`TRANSFER ORDER
`
`Before the Panel:∗ This litigation arises out of the collapse of the FTX cryptocurrency
`exchange in November 2022 and the subsequent bankruptcy of FTX Trading Ltd. and its
`U.S. affiliate FTX US (together, FTX). Plaintiffs are FTX customers and investors seeking to
`recover their losses. Defendants are individuals and entities that allegedly facilitated FTX’s
`wrongful conduct. This litigation currently consists of eight actions pending in two districts, as
`listed on Schedule A. Since the filing of the motion, the Panel has been notified of eleven related
`actions in the Northern District of California, Southern District of Florida, District of New Jersey,
`and Southern District of New York.1 Plaintiffs in the consolidated Garrison and Podalsky actions
`move under 28 U.S.C. § 1407 to centralize this litigation in the Southern District of Florida.
`
`Responding plaintiffs’ positions on centralization vary. Plaintiffs in three actions support
`centralization in the Southern District of Florida, and plaintiff in one action supports centralization
`in the Northern District of California. Plaintiffs in eleven actions oppose centralization or request
`exclusion of their actions from any MDL. In particular, plaintiffs in two potential tag-along actions
`(Rabbitte and Gershovich) which bring claims solely against investment firms Sequoia Capital
`Operations, LLC, Paradigm Operations LP, and Thoma Bravo, LP, request exclusion of their
`actions. Plaintiff in a potential tag-along action against Signature Bank (Statistica Capital)
`requests exclusion of that action. And plaintiffs in two potential tag-along actions request
`exclusion of the Bhatia, Magleby, and Keane actions against the Silvergate Bank defendants.2
`Most of the opposing plaintiffs propose the Northern District of California if the actions are
`centralized over their objections. Opposing plaintiff in one action (O’Keefe) proposes the Southern
`District of Florida.
`
`∗ One or more Panel members who could be members of the putative classes in this litigation have
`renounced their participation in the classes and have participated in this decision.
`
`1 These and any other related actions are potential tag-along actions. See Panel Rules 1.1(h), 7.1
`and 7.2.
`
`2 The Silvergate Bank defendants are Silvergate Bank, Silvergate Capital Corp., and Alan J. Lane.
`
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`Case 1:23-cv-20439-KMM Document 50 Entered on FLSD Docket 06/06/2023 Page 2 of 5
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`Responding defendants’ positions on centralization also vary considerably.3 Sequoia,
`Paradigm, and Thoma Bravo support centralization and have no preference on the transferee
`district. Prager Metis and Armanino support centralization in the Southern District of Florida. The
`Celebrity Defendants oppose centralization.4 The Silvergate Bank defendants oppose inclusion of
`any claims against them, and the FDIC opposes inclusion of the Statistica Capital action against
`Signature Bank.
`
`In opposition to centralization, the various plaintiffs and defendants primarily argue
`that the actions lack sufficient common questions of fact and informal coordination provides a
`practicable alternative. We find these arguments unpersuasive. The actions undoubtedly involve
`several non-overlapping defendants and raise defendant-specific issues. But they all rest on the
`same core set of facts concerning the alleged fraud that led to FTX’s collapse and, in particular,
`revolve around the conduct of FTX’s Samuel Bankman-Fried, the relationship with another
`Bankman-Fried company known as Alameda Research, and Alameda’s Caroline Ellison. Indeed,
`Bankman-Fried and Ellison are defendants in seven of the eight actions on the motion, and are
`central figures in all of the related actions before the Panel. Moreover, all actions on the motion
`allege that there was a conspiracy between Bankman-Fried and other alleged FTX insiders to make
`misrepresentations to consumers and investors to induce them to invest in FTX products and use
`the FTX exchange. This common factual core warrants centralization despite the involvement of
`a number of different defendants. See, e.g., In re January 2021 Short Squeeze Trading Litig.,
`MDL No. 2989, 2021 WL 1258399 (J.P.M.L. 2021) (centralizing actions “nam[ing] more than
`forty brokers, funds, and clearinghouses as defendants” where all actions involved common
`conduct concerning the Robinhood trading platform). Transfer under Section 1407 does not
`require a complete identity of common factual issues or parties as a prerequisite to transfer, and
`the presence of additional facts or differing legal theories is not significant where, as here, the
`actions still arise from a common factual core. See In re Auto Body Shop Antitrust Litig., 37 F.
`Supp. 3d 1388, 1390-91 & n.5 (J.P.M.L. 2014).
`
`We further find that informal coordination is not an adequate alternative to centralization.
`Although the actions in the Northern District of California are in the process of being organized
`into three tracks, there are still seven distinct groups of non-overlapping plaintiffs’ counsel
`pursuing claims in this litigation, including potential tag-along actions, on behalf of putative global
`and nationwide classes. Additionally, dozens of defendants are involved, with little overlap in
`their counsel. The large number of plaintiffs’ and defense counsel will pose serious obstacles to
`informal coordination. Inefficiencies also will arise from having to coordinate these unusually
`complex actions involving novel cryptocurrency issues with the related criminal case in the
`Southern District of New York and the bankruptcy case in the District of Delaware. Moreover,
`informal coordination does not address the possibility of inconsistent rulings on Daubert and class
`certification issues.
`
`3 The responding defendants are Prager Metis CPAs, LLC; Armanino LLP; Sequoia Capital
`Operations, LLC; Paradigm Operations LP; Thoma Bravo, LP; the Silvergate Bank defendants;
`and seven “Celebrity Defendants” – the Golden State Warriors, Thomas Brady, Gisele Bündchen,
`Lawrence David, Kevin O’Leary, David Ortiz, and William Trevor Lawrence. Additionally, the
`Federal Deposit Insurance Corporation responded as receiver for Signature Bank.
`
`4 The Golden State Warriors alternatively request the Northern District of California.
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`Although the Signature Bank and Silvergate Bank defendants are named only in the
`potential tag-along actions – not in the actions on the motion – we received extensive briefing and
`oral argument on whether the MDL should include them. Both plaintiffs and defendants in those
`actions oppose their inclusion in an MDL because Signature Bank was closed in March 2023 and
`is in FDIC receivership, and Silvergate Bank is in voluntary liquidation. Additionally, at oral
`argument, movants conceded that centralization of these claims is not warranted given the closure-
`related issues unique to those entities.5 Based on this record, we do not intend to include the claims
`against Signature Bank and the Silvergate Bank defendants.6
`
`On the basis of the papers filed and the hearing session held, we find that the actions on
`Schedule A involve common questions of fact, and centralization will serve the convenience of
`the parties and witnesses and promote the just and efficient conduct of this litigation. These actions
`present common questions of fact concerning the collapse of the FTX cryptocurrency exchange in
`November 2022, which allegedly was caused by the conduct of FTX former principals Sam
`Bankman-Fried, Zixiao “Gary” Wang, and Nishad Singh, and financial improprieties with
`Alameda Research. All actions allege that FTX executives fraudulently withheld or
`misrepresented information with respect to customer assets on the FTX platform and that the
`professional services firms and celebrity promoters who worked with FTX were complicit in or
`otherwise bear responsibility for the alleged fraud – for example, by concealing FTX’s financial
`problems or promoting FTX products with knowledge or willful blindness of the alleged fraud.
`The common factual questions include: (1) whether FTX executives and their representatives
`misled customers about FTX’s practices for safeguarding customer funds; (2) whether FTX
`executives and their representatives misrepresented the financial condition of the FTX entities;
`(3) whether FTX and Alameda executives embezzled customer assets; (4) the existence and scope
`of a conspiracy; and (5) the nature of FTX products, such as Yield-Bearing Accounts and FTT
`tokens. Centralization will eliminate duplicative discovery; prevent inconsistent pretrial rulings,
`especially with respect to class certification and Daubert motions; and conserve the resources of
`the parties, their counsel and the judiciary.
`
`The Southern District of Florida is an appropriate transferee district for this litigation.
`A significant part of FTX’s conduct allegedly emanated from this district, where it had its
`U.S. headquarters before filing for bankruptcy. This district also provides an easily accessible
`location for this nationwide litigation. Judge K. Michael Moore, who presides over the actions on
`the motion in this district, is an experienced transferee judge, and we are confident he will steer
`this matter on a prudent and expeditious course.
`
`5 For example, plaintiffs in Statistica Capital v. Signature Bank are subject to an exhaustion of
`administrative remedies requirement under the Financial Institutions Reform, Recovery and
`Enforcement Act because of the FDIC receivership, and that action thus has been stayed.
`
`6 We intend to transfer the actions against Sequoia, Paradigm, and Thoma Bravo through the
`conditional transfer order process, based on the common factual core discussed above. See Panel
`Rule 7.1(b). Those actions do not present the same efficiency concerns as the actions involving
`banks in closure-related proceedings.
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`IT IS THEREFORE ORDERED that the actions listed on Schedule A and pending outside
`the Southern District of Florida are transferred to the Southern District of Florida and, with the
`consent of that court, assigned to the Honorable K. Michael Moore for coordinated or consolidated
`pretrial proceedings.
`
` PANEL ON MULTIDISTRICT LITIGATION
`
` _________________________________________
` Karen K. Caldwell
` Chair
`
`Nathaniel M. Gorton
`David C. Norton
`Dale A. Kimball
`
`Matthew F. Kennelly
`Roger T. Benitez
`Madeline Cox Arleo
`
`

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`Case 1:23-cv-20439-KMM Document 50 Entered on FLSD Docket 06/06/2023 Page 5 of 5
`
`IN RE: FTX CRYPTOCURRENCY EXCHANGE
`COLLAPSE LITIGATION
`
` MDL No. 3076
`
`SCHEDULE A
`
`Northern District of California
`
`LAM v. BANKMAN-FRIED, C.A. No. 3:22−07336
`PIERCE v. BANKMAN-FRIED, ET AL., C.A. No. 3:22−07444
`HAWKINS v. BANKMAN-FRIED, ET AL., C.A. No. 3:22−07620
`JESSUP v. BANKMAN-FRIED, ET AL., C.A. No. 3:22−07666
`PAPADAKIS v. BANKMAN-FRIED, ET AL., C.A. No. 3:23−00024
`
`Southern District of Florida
`
`GARRISON v. BANKMAN-FRIED, ET AL., C.A. No. 1:22−23753
`PODALSKY, ET AL. v. BANKMAN-FRIED, ET AL., C.A. No. 1:22−23983
`NORRIS, ET AL. v. BRADY, ET AL., C.A. No. 1:23−20439
`
`