The FTX Recovery Trust, responsible for managing the bankruptcy proceedings of cryptocurrency exchange FTX, has initiated legal action to recover over $1 billion in funds transferred by former CEO Sam Bankman-Fried.
A recent filing in the US Bankruptcy Court for the District of Delaware revealed that the FTX Recovery Trust filed a lawsuit against crypto mining firm Genesis Digital Assets (GDA), its affiliates, and two co-founders. The complaint seeks to reclaim approximately $1.15 billion of funds described as “commingled and misappropriated.”
These funds are alleged to have been connected directly to fraudulent activities impacting FTX’s customers and creditors during 2021 and 2022 under Bankman-Fried’s leadership.
Investigation indicates that Bankman-Fried directed Alameda Research, a sister company to FTX led by CEO Caroline Ellison, to acquire shares in GDA at significantly inflated prices. Specifically, Alameda reportedly purchased 154 preferred shares for over $500 million. Additionally, Bankman-Fried is accused of sending $550.9 million directly to two GDA co-founders, Rashit Makhat and Marco Krohn.
The suit further claims that by 2021, Bankman-Fried had already diverted billions in customer funds from FTX’s exchange to Alameda. Despite Alameda’s growing debt to FTX, the overvalued GDA shares purchase was executed, benefiting Bankman-Fried personally as a 90% owner of Alameda while shifting losses to creditors and customers of the FTX group.
The transfers are alleged to have been structured to enrich Bankman-Fried, capturing the benefits of GDA’s inflated valuation and potential upside, while passing the financial risks onto FTX’s creditors.
This lawsuit comes amid ongoing efforts by the FTX Recovery Trust to retrieve assets lost in the exchange’s collapse, which led to bankruptcy filing in 2022. Bankman-Fried and other former executives are currently incarcerated.
The complaint also criticizes Bankman-Fried for relying on misleading financial documents and ignoring warning signs during the investment decision in Genesis Digital, which was headquartered in Kazakhstan—a country facing an energy crisis at the time.
In a related matter, a 2023 bankruptcy court approved a $175 million settlement with Genesis Global Trading, a separate entity from GDA, agreeing to repay FTX.
Following more than two years in court, the FTX Recovery Trust commenced distributing funds to creditors in early 2025, including a $1.2 billion initial payout and a $5 billion disbursement in May. An additional $1.6 billion is expected to be released to creditors by the end of September.
