FTX Trust Sues Genesis Digital for $1.15B Clawback Over Alleged Fraudulent Transfers
The FTX Recovery Trust has filed a $1.15 billion lawsuit in opposition to the Bitcoin mining agency Genesis Digital Assets, alleging fraudulent transfers.
The criticism, filed on Monday in U.S. Bankruptcy Court for the District of Delaware, alleges that Sam Bankman-Fried used misappropriated FTX buyer funds to buy Genesis Digital shares at “outrageously inflated costs” via his hedge fund, Alameda Research, between August 2021 and April 2022.
Genesis Digital co-founders Rashit Makhat and Marco Krohn acquired $470 million and $80.9 million, respectively, for their shares in February 2022, in keeping with courtroom paperwork.
The belief contends that solely Alameda, and by extension Bankman-Fried, as its 90% owner, benefited from the investments, whereas FTX clients and collectors suffered losses from the diverted trade funds.
Genesis Investment Timeline Reveals Systematic Fund Diversion
Court paperwork reveal that discussions between Bankman-Fried and Genesis Digital started in July 2021, when the Kazakhstan-based mining firm was looking for capital to increase its operations into the United States.
Bankman-Fried joined Genesis Digital’s board in October 2021, in keeping with Bloomberg, positioning himself to supervise what would turn into one among Alameda’s largest enterprise investments.
The criticism describes how the FTX founder brought about Alameda to buy a number of tranches of Genesis shares over an eight-month interval, with the lawsuit characterizing Genesis as “one among Bankman-Fried’s most reckless investments with commingled and misappropriated funds.“
Between August 2021 and April 2022, Alameda invested $1.15 billion throughout 4 distinct funding rounds: $100 million in August 2021, $550 million in January 2022, $250 million in February, and $250 million in April 2022.
The belief alleges that FTX insiders commonly brought about Alameda to “borrow” billions from the FTX.com trade to fund “profligate life and self-importance investments” whereas hiding the supply of those funds from traders and collectors.
Bankman-Fried resigned from Genesis Digital’s board sooner or later earlier than FTX filed for chapter in November 2022, in keeping with the courtroom submitting.
Mining Sector Faces Renewed Scrutiny Amid FTX Fallout
The Genesis Digital lawsuit is the most recent effort by FTX’s chapter property to get well belongings for collectors, with the trust having already distributed $6.2 billion throughout two earlier rounds of funds.
The belief accomplished a $1.2 billion distribution in February, adopted by a bigger $5 billion payout in May, with an additional $1.6 billion distribution scheduled for September 30, bringing complete recoveries to just about half of the $16.5 billion earmarked for victims.
The @FTX_Official Recovery Trust is getting ready a 3rd spherical of distributions to collectors, totaling $1.6 billion, because it continues efforts to return funds.#FTX #Cryptohttps://t.co/0SSsdhOiPA
— Cryptonews.com (@cryptonews) September 20, 2025
These restoration efforts come as Genesis Digital, which operates over 500 megawatts of mining capability throughout 20 knowledge facilities on 4 continents, noticed its valuation attain $5.5 billion throughout an April 2022 fundraising spherical shortly earlier than cryptocurrency costs collapsed later that yr.
The mining firm was exploring an initial public offering within the United States as not too long ago as July 2024, working with advisors to judge a possible itemizing and planning a pre-IPO funding spherical amid the crypto trade’s restoration from the 2022 market downturn.
However, the FTX lawsuit provides one other layer of complexity to Genesis Digital’s company construction, which incorporates an in depth community of U.S. subsidiaries with names like Dog House TX-1, Mother Whale LLC, and White Deer LLC.
The criticism alleges that these U.S. subsidiaries function as “alter egos” of the mum or dad firm, probably exposing your complete company construction to clawback claims beneath each federal chapter regulation and Delaware state fraudulent switch statutes.
Meanwhile, Bankman-Fried continues to serve his 25-year prison sentence following his conviction on seven felony expenses, with oral arguments for his enchantment scheduled for November 4, 2025.
The lawsuit provides to the complicated internet of litigation following the $175 million settlement earlier this yr with Genesis Global, a subsidiary of Digital Currency Group, as collectors and chapter trustees pursue restoration efforts throughout a number of jurisdictions and company entities tied to the failed trade.
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