The FTX Recovery Trust sued bitcoin mining firm Genesis Digital Assets Limited in bankruptcy court after they said former FTX CEO Sam Bankman-Fried used commingled funds to invest in the mining company ahead of the exchange’s collapse.
In a lawsuit filed on Monday in the U.S. Bankruptcy Court for the District of Delaware, the trust called the investment of money from FTX’s sister firm Alameda into Genesis Digital Assets (GDA) “one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds.”
GDA, based in Kazakhstan, was grossly overvalued, especially taking into account unrest in the country following continued blackout and new taxes, the trust said in the lawsuit.
Ultimately, Bankman-Fried invested $1.15 billion in GDA, with $550 million to its cofounders Rashit Makhat and Marco Krohn, they said, and are asking the court to get that money back.
A GDA spokesperson declined to comment.
FTX collapsed in November 2022 and later filed for bankruptcy, marking a pivotal moment for the crypto industry, given that FTX was one of the largest exchanges and had been active in Washington. Bankman-Fried was accused of using customer money to fund different investments at crypto hedge fund Alameda. He was ultimately sentenced to 25 years in prison related to defrauding customers and investors of FTX out of around $8 billion in assets.
In Monday’s lawsuit, the FTX Recovery Trust said GDA did not give Bankman-Fried audited financial statements and said the unaudited versions “bore no relation to reality” and didn’t reflect problems with the electrical grid in Kazakhstan.
“Despite the uncooperative due diligence process, GDA’s gross overvaluation, the widespread political unrest, and the newly implemented taxes and crippling energy caps—which were especially severe during the winter months, as Kazakhstan prioritized heating households over supplying power to Bitcoin miners—Bankman-Fried nonetheless pushed forward with the deal,” the trust said.
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