Bankruptcy estate targets crypto mining investments tied to Sam Bankman-Fried
The FTX Recovery Trust has filed a lawsuit in the U.S. Bankruptcy Court for the District of Delaware to recover more than $1 billion allegedly misused by former CEO Sam Bankman-Fried in crypto mining investments.
Allegations of inflated investments
According to court filings, Bankman-Fried directed over $1.15 billion in FTX customer funds toward Genesis Digital Assets (GDA), a mining company operating in Kazakhstan. The funds, routed through Alameda Research and other entities, were allegedly used to buy GDA shares at “outrageously inflated prices.”
The complaint stated:
“By 2021, Bankman-Fried had already caused billions of dollars of customer funds to be diverted from the FTX.com exchange to Alameda. Despite ballooning debt, Alameda paid more than $1.15 billion for wildly overvalued GDA shares.”
FTX lawyers claim the transactions personally benefited Bankman-Fried, who owned 90% of Alameda, while shifting the losses to FTX creditors and customers.
Direct payments to executives
The lawsuit alleges that $550.9 million was sent directly to GDA co-founders Rashit Makhat and Marco Krohn, while another $500 million purchased 154 preferred shares. The filing said Bankman-Fried relied on “misrepresentations and ignored clear red flags” in approving the investments, despite Kazakhstan’s energy shortages and questionable financial reporting from GDA.
Recovery efforts continue
The case is part of broader efforts by the FTX Recovery Trust to reclaim misused funds following the exchange’s 2022 collapse. Earlier, Genesis Global Trading — a separate entity from GDA — agreed to a $175 million settlement with FTX.
Creditors have started receiving repayments this year, with $1.2 billion distributed in February, $5 billion in May, and another $1.6 billion scheduled for release on September 30.
Broader implications for crypto bankruptcy cases
Legal experts note the case underscores how mismanaged investments and inflated valuations can deepen the fallout of major crypto bankruptcies. The FTX estate has pursued numerous lawsuits against counterparties as it seeks to maximize recoveries for creditors.
If successful, the lawsuit against Genesis Digital could mark one of the largest clawbacks in the ongoing FTX bankruptcy saga.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.