FTX Creditors Sue Kroll Over Massive Data Breach and Phishing Scam Fallout

FTX's bankruptcy saga takes another dramatic turn as creditors launch legal action against restructuring firm Kroll—claiming negligence led to devastating data exposure and phishing attacks that wiped out remaining assets.

The Breach That Keeps Bleeding

Kroll's security failures allegedly exposed sensitive creditor information during FTX's bankruptcy proceedings, creating a feeding frenzy for scammers. Phishing attacks surged immediately after the breach, draining what little value remained in compromised accounts.

Legal Reckoning for Digital Negligence

The lawsuit claims Kroll failed to implement basic security protocols despite handling billions in crypto claims. Creditors argue the firm should have anticipated targeting given FTX's high-profile collapse and the notoriously aggressive crypto scam ecosystem.

Another reminder that in crypto, the sharks circle long after the ship sinks—and sometimes they're wearing suits and carrying subpoenas.

FTX creditors have lately been facing a lot of uncertainty and risk as they try to recover their funds after the exchange’s collapse.

Recently, a class-action lawsuit has been filed against Kroll, the financial and risk advisory firm responsible for managing claims for FTX, BlockFi, and Genesis.

Let us take a closer look at what the lawsuit alleges and what it could mean for creditors.

Lawsuit Highlights Phishing Risks

The lawsuit, filed by Hall Attorneys on behalf of FTX customer Jacob Repko and others, is over a data breach in August 2023. It claims that the breach has exposed crypto creditors’ personal information, leaving them vulnerable to phishing attacks and other scams.

Kroll had confirmed that no FTX passwords or digital assets were affected, but it had warned that the data could be used in phishing scams.

I filed a class action against Kroll alleging data breach and negligent claims administration in the FTX, BlockFi, and Genesis bankruptcy cases

Victims go here: https://t.co/So6iOOg65t

Read the complaint here: https://t.co/sIeIE6iJKg pic.twitter.com/IVRGNT14qa

Kroll’s Email-Only System Creates Problems

Beyond the breach, the complaint highlights serious issues with Kroll’s reliance on email to manage claims. The filing argues that this system created problems such as:

• Missed deadlines due to unreliable email notifications
• Delays and lockouts caused by compromised verification processes
• Financial losses for some creditors

Plaintiff Repko reported losing 1.9 ETH in a phishing scam after the breach. He also faced repeated issues with the claims portal, including KYC blocks and problems uploading tax forms that put his claims at risk of being forfeited.

Creditors Demand Stronger Protections

The lawsuit is not just seeking compensation for phishing attacks, delays, and lost claims; it is also pushing for real changes in how creditors are notified and claims are handled.

Key demands include multiple notification methods, clear status-update letters with deadlines, non-gated manual claim options, tighter address-change controls, deliverability safeguards, and independent audits.

“After a known security incident and impersonation wave, you can’t run deadlines on email only and offer no mailed confirmations or manual fallbacks,” Nicholas Hall said.

He also shared that all creditors, both in the U.S. and the Bahamas, are encouraged to participate.

Court Approval Could Impact Compensation and Processes 

If the court certifies the case and approves a settlement or judgment, eligible creditors could receive financial compensation as well as benefit from operational changes at Kroll.

Costs you nothing.

Potential outcomes—if the Court certifies the case and later approves a settlement or enters judgment—can include two things:
• Monetary relief for eligible class members (for example, up to $750 or actual damages for California victims, but depends on…

Meanwhile, FTX activist Sunil Kavuri recently shared that creditors are now getting scam emails every day, pretending to be from FTX in the Bahamas. 

FTX Creditors now daily receive scam emails impersonating FTX, Bahamas. Just received one few hours ago

Full name is included

Nicholas has filed a class action for the alleged data breach at Kroll https://t.co/kILxhygv90 pic.twitter.com/GcpEn2pu1I

FTX Payouts Begin Sep. 30

This comes as FTX prepares its third round of reimbursements, set to begin on September 30, totaling $1.9 billion. 

While these payouts help creditors recover their funds, they could also trigger a spike in scam emails. Creditors should remain vigilant and stick to official channels. 

The payouts will be made through BitGo, Kraken, and Payoneer.