FTX Recovery Fund sues Genesis Digital Assets, alleging Sam Bankman-Fried used client money to buy shares at “grossly inflated” prices.
The legal battle to recover assets for victims of the collapsed FTX exchange continues to escalate as FTX Recovery Trust files a $1.15 billion lawsuit against Genesis Digital Assets and its co-founders. The lawsuit, filed Monday, accuses former CEO Sam Bankman-Fried of mismanaging customer Capital invested in the Bitcoin mining company.
According to the lawsuit, Bankman-Fried purchased shares of Genesis Digital Assets through FTX’s sister company, Alameda Research, using commingled customer funds at a grossly inflated price. FTX’s new management described this as one of Bankman-Fried’s most reckless investments using misappropriated Capital .
Fraudulent transfer allegations
The lawsuit details that the 2021 stock purchases were fraudulent transfers, with Bankman-Fried benefiting and not suffering any loss from the transactions with Genesis Digital Assets. Despite paying with client money and other misappropriated Capital , he personally benefited because the shares were held by Alameda, a company of which he owned 90%.
Genesis Digital Assets declined to comment when contacted by Decrypt. The Bitcoin mining company was originally based in Kazakhstan at the time of Bankman-Fried's investment, but has since expanded with data centers in the United States and Europe and moved its headquarters to Dubai, UAE.
Bankman-Fried is currently serving a 25-year prison sentence in Southern California after being convicted by a jury on seven counts in November 2023. He and his senior associates mismanaged the exchange, largely by using customer funds to cover losses on risky bets made by Alameda Research.
The collapse dwarfs even the infamous Enron bankruptcy of the early 2000s, said John J. Ray III, an attorney tasked with recovering lost investments for FTX clients. The restructuring team is now working to recover as much of the assets as possible to compensate victims of one of the biggest financial frauds in tech history.
