FTX Trust has initiated legal proceedings against Genesis Digital, a previous collaborator of the now-defunct exchange. The Trust seeks to recover approximately $1.15 billion in lost assets, asserting that the transactions were fraudulent.
This marks not the first lawsuit of its kind, as the Trust recently attempted to file similar claims against Binance. The potential outcomes of this legal action remain uncertain.
FTX Trust Sues Genesis
The collapse of FTX in late 2022 continues to reverberate throughout the crypto market, with the ongoing process of creditor reimbursements influencing market dynamics. Thus, the Trust’s latest lawsuit against Genesis Digital, a former partner, is drawing significant attention.
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This recent lawsuit from FTX claims that Genesis benefitted from fraudulent transactions executed by former CEO Sam Bankman-Fried. It aims to recover some of the lost assets, arguing that these decisions served Bankman-Fried’s personal interests rather than those of the company:
“Bankman-Fried caused Alameda to purchase several tranches of shares in [Genesis Digital Assets], a Bitcoin mining firm, at unreasonably inflated prices. Genesis Digital stands as one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds,” the filing stated.
Notably, Bankman-Fried was on the board of Genesis at that time, resigning just a day before FTX declared bankruptcy.
By distancing the firm’s past leadership from the financial interests of FTX and its creditors, the Trust intends to leverage this connection to assert that the transactions were fraudulent.
Clawback Lawsuits
Given that FTX Trust faces significant reimbursement responsibilities, the Genesis lawsuit appears to be a strategic move. Last month, the Trust filed comparable claims against Binance, seeking to retrieve $1.76 billion from the exchange.
CZ, the former CEO, has requested that a US bankruptcy court dismiss the lawsuit.
The likelihood of the courts aligning with today’s argument remains unclear. Despite Genesis Digital facing various challenges with the federal government, a civil suit from FTX constitutes a different scenario.
While Bankman-Fried has been found guilty of several crimes during his tenure as CEO, he is currently serving time in prison. Can the Trust disregard all of his decisions?
FTX Trust is exploring all available options. The outcome of the lawsuit is highly unpredictable, but this endeavor demonstrates the Trust’s dedication to restoring its creditors.
