FTX Recovery Trust Legal Proceedings
The FTX Recovery Trust has initiated legal proceedings against Genesis Digital Assets, a prominent Bitcoin mining company, seeking to reclaim $1.15 billion. The lawsuit was lodged on Monday in the U.S. Bankruptcy Court located in the District of Delaware, with accusations pointing towards deceitful financial practices.
Allegations Against Sam Bankman-Fried
The complaint alleges that Sam Bankman-Fried, founder of the defunct crypto exchange FTX, misused customer deposits to acquire Genesis Digital shares at significantly inflated valuations through his hedge fund, Alameda Research, over a period from August 2021 to April 2022.
Specific figures outlined in the court documents claim that Genesis Digital’s co-founders, Rashit Makhat and Marco Krohn, made substantial profits of $470 million and $80.9 million respectively from the sale of shares in February 2022.
The FTX Recovery Trust argues that the ill-gotten gains from these transactions primarily benefited Bankman-Fried—who held a 90% stake in Alameda—while causing considerable financial harm to FTX’s customers and creditors who relied on the exchange’s funds.
Investment Timeline and Allegations of Misconduct
Documents reveal that discussions centered around investments began in July 2021, coinciding with Genesis Digital’s ambitions to expand into the U.S. market. By October 2021, Bankman-Fried was appointed to Genesis Digital’s board, a strategic move that set the stage for significant investments that formed part of Alameda’s portfolio.
Allegedly, over eight months, Alameda allocated a total of $1.15 billion in four separate investment rounds into Genesis, with amounts including:
- $100 million in August 2021
- $550 million in January 2022
- $250 million in February
- $250 million in April 2022
The trust’s complaint further claims that insiders at FTX systematically siphoned off billions from the FTX.com exchange for personal extravagances and speculative investments, concealing the true source of these funds from stakeholders. Notably, Bankman-Fried stepped down from the board of Genesis Digital just one day prior to FTX’s bankruptcy filing in November 2022.
Ongoing Bankruptcy Recovery Efforts
This lawsuit marks a continuation of FTX’s bankruptcy estate’s attempts to recover lost assets for its creditors, following the distribution of $6.2 billion in previous payments. Recoveries included a $1.2 billion disbursement in February and later a $5 billion distribution in May of the current year, with an additional $1.6 billion projected for September 30, which cumulatively aims to recover nearly half of the $16.5 billion meant for affected clients.
Genesis Digital’s Business Landscape
Amid all this, Genesis Digital, which boasts operations in 20 data centers worldwide and over 500 megawatts of mining capacity, saw its valuation soar to $5.5 billion during a fundraising round in April 2022, mere months before a significant downturn in cryptocurrency values. The firm had been contemplating a U.S. initial public offering (IPO) as recently as July 2024, even devising strategies for a potential pre-IPO fundraising initiative amidst signs of recovery in the crypto marketplace.
However, the ongoing legal contention complicates Genesis Digital’s business framework, which is intertwined with a variety of U.S. subsidiaries bearing quirky names such as Dog House TX-1 and Mother Whale LLC. The lawsuit alleges that these subsidiaries function as “alter egos” of the main company, potentially making the entire corporate entity susceptible to claims for asset recovery based on federal bankruptcy regulations and Delaware’s laws regarding fraudulent transfers.
Sam Bankman-Fried’s Legal Troubles
Meanwhile, Sam Bankman-Fried remains imprisoned, serving a 25-year sentence after being found guilty on multiple felony charges, with his appeal hearings slated to commence on November 4, 2025. This lawsuit against Genesis Digital adds to the intricate landscape of legal battles that continue to unfold following FTX’s collapse, which notably includes a $175 million settlement reached earlier this year with Genesis Global, a branch of the Digital Currency Group, as various creditors navigate recovery efforts across a complex network of related companies and jurisdictions.
