FTX Recovery Trust Sues Bitcoin Miner Genesis Digital Assets for $1.15 Billion

The FTX Recovery Trust is suing Bitcoin mining company Genesis Digital Assets and its co-founders in an attempt to retrieve $1.15 billion it claims was mismanaged by disgraced ex-FTX CEO Sam Bankman-Fried. 

In a lawsuit filed Monday, the collapsed crypto exchange’s new management said that the Bankman-Fried bought shares of the Bitcoin miner with commingled customer funds at “outrageously inflated prices.”

The FTX exchange  collapsed in November 2022 due to Bankman-Fried’s criminal mismanagement of the company. It is now being led by a restructuring team to recover money for former customers. 

“Genesis Digital Assets stands as one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds,” Monday’s lawsuit read. 

It added that Bankman-Fried bought shares of Genesis Digital Assets via FTX’s sister company, Alameda Research, using “commingled and misappropriated funds, including those deposited by FTX.com exchange customers.”

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“Bankman-Fried’s purchases were archetypical fraudulent transfers,” the lawsuit alleged. “In 2021, Bankman-Fried had everything to gain and nothing to lose from the GDA transactions. 

“Although Bankman-Fried paid for the GDA shares using commingled and misappropriated funds, including those deposited by FTX.com exchange customers, he personally stood to benefit from the acquisition because the GDA shares he acquired were held by Alameda, of which Bankman-Fried was a 90% owner.”

Genesis Digital Assets declined to comment when Decrypt reached out. The Bitcoin miner was based in Kazakhstan when Bankman-Fried invested in it, but now has data centers in the U.S.  and Europe. It is headquartered in Dubai, UAE. 

Bankman-Fried was arrested, charged and later jailed for defrauding customers out of billions of dollars. He is now serving a 25-year jail sentence in a Southern California prison after a jury found him guilty in November 2023 on seven charges.

Bankman-Fried, criminally mismanaged the exchange with top associates, mainly by using customer cash to cover risky bets made by Alameda Research.

John J. Ray III, the highly-experienced lawyer tasked with recovering FTX customers’ missing investments, said FTX’s collapse surpassed the high-profile bankruptcy of energy company Enron in the early 2000s.