FTX Trust Accuses Genesis of Using Customer Funds to Pump Valuation, Benefit Founders

The FTX Recovery Trust has filed a $1.15 billion lawsuit against Genesis Digital Assets, alleging fraudulent transfers of customer funds to inflate the Bitcoin mining firm’s valuation and benefit co-founders Rashit Makhat and Marco Krohntitle5^[3]. The lawsuit, submitted to the U.S. Bankruptcy Court for the District of Delaware on September 22, 2025, accuses Sam Bankman-Fried (SBF) of using misappropriated FTX customer deposits to purchase Genesis shares through his hedge fund, Alameda Research, between August 2021 and April 2022title5^[3]. The trust claims these transactions occurred while FTX was already insolvent, causing significant harm to creditors and customerstitle5^[3].

Court documents reveal that Alameda invested $1.15 billion across four funding rounds during this period: $100 million in August 2021, $550 million in January 2022, $250 million in February, and $250 million in April 2022title5^[3]. Makhat and Krohn received $470 million and $80.9 million, respectively, from the sale of their shares to Alameda in February 2022title5^[3]. The trust asserts that these transfers provided no tangible value to FTX’s business and were executed at “outrageously inflated prices”title5^[3]. The lawsuit further characterizes Genesis as one of SBF’s “most reckless investments with commingled and misappropriated funds,” citing risks such as Kazakhstan’s energy crisis, unaudited financials, and money laundering concernstitle6^[4].

Genesis Digital, which operates 500 megawatts of mining capacity across 20 data centers, saw its valuation surge from $3.25 billion in July 2021 to between $8.3 billion and $12.2 billion by November 2021. The company’s ties to Kazakhstan’s and its reliance on low-cost energy were highlighted as factors in its rapid growth. However, the lawsuit notes that SBF ignored these risks, including regulatory challenges and energy instability in Kazakhstan, during his investments. Bankman-Fried resigned from Genesis’s board one day before FTX’s November 2022 bankruptcy filingtitle5^[3].

The FTX Trust’s legal action is part of broader recovery efforts, which have already distributed $6.2 billion to creditors in two rounds. A third distribution of $1.6 billion is scheduled for September 30, 2025, bringing total recoveries to nearly half of the $16.5 billion earmarked for victimstitle5^[3]. The trust seeks not only the $1.15 billion but also additional damages, attorneys’ fees, and interest. Meanwhile, Genesis Digital has faced its own challenges, including delayed IPO plans and scrutiny over its corporate structure, which includes U.S. subsidiaries potentially exposed to fraudulent transfer claimstitle5^[3].

The lawsuit adds to the complex web of litigation surrounding FTX’s collapse, including a $175 million settlement with Genesis Global earlier this year. SBF, currently serving a 25-year prison sentence for fraud and conspiracy, has an appeal hearing scheduled for November 4, 2025title5^[3]. The case underscores the scale of FTX’s asset recovery campaign, which has become one of the largest and most intricate in U.S. bankruptcy historytitle6^[4].