FTX Crypto Sues Bitcoin Miner Genesis Digital To Recover $1.15 Billion

Bankrupt crypto exchange FTX has filed a clawback lawsuit against Bitcoin miner Genesis Digital Assets. The legal action seeks to recover $1.15 Billion from the firm.

According to the FTX case, the funds are misappropriated customer deposits invested in Genesis by Alameda Research. FTX convicted co-founder Sam Bankman-Fried owned 90% of Alameda Research.

FTX Crypto Lawsuits Target Genesis Co-founders

Interestingly, the lawsuit included Genesis Digital’s co-founders Rashit Makhat and Marco Krohn. According to the filing, Alameda transferred $550.9 Million to the cofounders to buy their stake in the company.

The exchange said that Alameda bought shares of Genesis on Bankman-Fried’s instructions. It claimed the price was far above market value, using commingled funds from FTX customers.

The filing  stated:

The lawsuit described the investment in Genesis as one of the most reckless by Bankman-Fried. It noted that the Bitcoin miner, based in Kazakhstan and planning expansion into the US, was not worth that much.

Per the filing, Genesis Digital misrepresented its financial position to Bankman-Fried, and he did not conduct due diligence. Specifically, FTX claimed that the miner presented unaudited financial statements that gave it an outrageous valuation.

Bankman-Fried initially invested $100 Million in November 2021. However, he committed to invest another $1 Billion by the end of that month. He transferred $550.9 million in January 2022 to the Genesis co-founder.

Another $501 Million was sent in February 2022. A final transfer of the same amount followed in April 2022. FTX estate claims that all these funds belong to FTX customers.

Genesis’s business is now valued at a fraction of the original investment. FTX claims the transfers were unjustified. It is seeking a court order to label them as avoidable fraudulent transactions.

The lawsuit against Genesis represents one of the biggest clawback efforts by the FTX estate. The exchange also pursues an action against Binance and seeks to claw back $1.8 billion.

FTX Crypto Set to Make Another Batch of Repayments

Meanwhile, the bankrupt exchange is preparing for the third repayment to creditors. FTX creditor champion Sunil Kavuri shared on X that FTX Bahamas has started emailing creditors.

The next repayment is scheduled for September 30, with creditors having less than $50,000 in claims getting 120.5% repayment. Several customers are already looking forward to this after years of waiting for repayment. Some claims above $50,000 are also expected to be paid.

However, several victims of the FTX collapse are still waiting to resolve know your customer (KYC) issues. Others claim the claim settlement button is not yet active on their profile.

Even worse, users in restricted countries such as mainland China, Russia, Ukraine, and most African countries remain in the dark. It is unclear when they will get their repayment.

Chinese FTX creditor Zhetengji noted that Chinese creditors living overseas who resubmitted their documents have received distribution emails. However, those in mainland  China are still waiting.

Interestingly, hope of justice for FTX creditors is fading, with most appeals now dismissed. The only pending appeal is from a Singapore creditor, Kihyuk Kam, who is seeking the return of FTT tokens. The case is set for a hearing on October 23.