The entity tasked with managing the bankruptcy of cryptocurrency exchange FTX has initiated a lawsuit to recover over $1 billion in funds transferred by its former CEO, Sam “SBF” Bankman-Fried.
In a filing made on Monday in the US Bankruptcy Court for the District of Delaware, the FTX Recovery Trust submitted a complaint against the crypto mining firm Genesis Digital Assets (GDA), along with its affiliates and two of its co-founders, in a bid to reclaim $1.15 billion in “commingled and misappropriated funds.”
The filing states that these funds were directly linked to Bankman-Fried’s “deception of customers and other creditors” at FTX during 2021 and 2022.
The complaint accused SBF of directing Alameda Research, FTX’s sister company, led by CEO Caroline Ellison, to buy GDA shares “at exorbitantly inflated prices”—over $500 million for 154 preferred shares. He is also said to have purchased $550.9 million in GDA shares by transferring funds directly to co-founders Rashit Makhat and Marco Krohn.
“By 2021, Bankman-Fried had already caused billions of customer funds to be siphoned from the FTX.com exchange to Alameda,” the filing asserts. “Despite the increasing debt Alameda owed to FTX.com, Bankman-Fried allowed Alameda to pay over $1.15 billion for grossly overvalued GDA shares.”
The complaint continued:
“The Transfers were intended to benefit Bankman-Fried personally: as the 90% owner of Alameda, he stood to gain nearly all of the advantages from GDA’s inflated valuation and potential success (for both GDA and Bitcoin generally), while simultaneously externalizing the losses to FTX Group’s creditors and customers.”
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The lawsuit against Genesis Digital follows attempts by the FTX Recovery Trust to recover funds related to the collapse of the exchange. FTX declared bankruptcy in 2022, and several of its former executives, including Bankman-Fried, are currently incarcerated.
According to the complaint, SBF “relied on blatant misrepresentations and ignored warning signs” when deciding to invest in Genesis Digital. At the time, the company, based in Kazakhstan, was undergoing an energy crisis, and allegedly provided financial documents to Bankman-Fried that “bore no resemblance to reality.”
In 2023, a bankruptcy court sanctioned a $175 million settlement in which Genesis Global Trading—unrelated to GDA—agreed to compensate FTX.
After more than two years in bankruptcy court, the FTX Recovery Trust began disbursing funds to creditors in February. The recovery strategy commenced with a $1.2 billion payout for claimants, followed by a $5 billion distribution in May. It is anticipated to unlock $1.6 billion for creditors on September 30.
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