FTX Trust Sues Genesis Digital for $1.15B in Fraudulent Pre-Bankruptcy Transfers
The FTX Trust has launched a $1.15 billion lawsuit against Genesis Digital Assets, a BitcoinBTC-- mining firm, alleging fraudulent transfers of funds from FTX’s bankruptcy estate[1]. The legal action, filed in the U.S. Bankruptcy Court for the District of Delaware, seeks to recover over $1 billion in payments made to Genesis Digital and its co-founders, Rashit Makhat and Marco Krohn, between August 2021 and April 2022[2]. The trust claims these transactions, facilitated through Alameda Research—the hedge fund controlled by FTX co-founder Sam Bankman-Fried—were conducted at “outrageously inflated prices” and provided minimal value to FTX’s business, which was already insolvent at the time[3]. The lawsuit underscores one of the largest clawback efforts in the FTX bankruptcy proceedings, leveraging U.S. bankruptcy laws to pursue “avoidance actions” against improper pre-bankruptcy transfers[1].
The FTX Trust alleges that the transfers originated from customer deposits on FTX.com, which were funneled into Alameda Research and subsequently redirected to Genesis Digital[2]. Internal communications cited in the filing describe the valuations paid for Genesis Digital shares as “insane and off-market,” while contemporaneous risks—including energy shortages in Kazakhstan and unproven U.S. expansion plans—raised doubts about the miner’s viability[3]. The trust further contends that Makhat and Krohn personally benefited, selling $550.9 million of their own shares to Alameda during the transactions[2]. These actions, the trust argues, exacerbated the financial instability of FTX, which collapsed in 2022, and deprived creditors of recoverable assets[1].
Genesis Digital, based in Kazakhstan, is described in the lawsuit as a politically connected miner that leveraged favorable treatment under the country’s , Nursultan Nazarbayev, including access to low-cost energy[4]. However, by late 2021, the region’s grid faced strain from an influx of miners, and new taxes, blackouts, and social unrest further destabilized the industry[4]. Despite these red flags—including unaudited financials, money laundering concerns, and a lack of interest from other investors—Bankman-Fried allegedly pressed forward with the investments[2]. The trust notes that Genesis Digital’s valuation surged from $3.25 billion in July 2021 to between $8.3 billion and $12.2 billion by November 2021, a jump criticized as unsustainable[4].
The lawsuit is part of the FTX Trust’s broader asset recovery campaign, which has become one of the most complex in U.S. bankruptcy history. The trust is represented by multiple law firms and is pursuing claims under both federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act, alleging actual and constructive fraud[3]. The filing adds to a series of legal actions against entities and individuals tied to FTX’s downfall, including a $175 million settlement earlier this year with Genesis Global, the lending arm of Digital Currency Group[3]. The current case is also notable for its timing: the trust is preparing for its third distribution to creditors, scheduled to begin on September 30, 2025[5].
The case highlights the scale of mismanagement and self-dealing during FTX’s collapse. Bankman-Fried, who is serving a 25-year prison sentence after being convicted of fraud and conspiracy, is accused of exploiting his control over Alameda to enrich himself and others at FTX’s expense[4]. The trust’s filing details how the transactions allowed Genesis Digital’s founders to “cash out of a failing company” while FTX’s insolvency worsened[4]. The lawsuit also references Bankman-Fried’s December 2021 visit to Kazakhstan to meet with President Kassym-Jomart Tokayev, which failed to address concerns about the miner’s operations[4]. The trust seeks not only the $1.15 billion in disputed funds but also additional amounts uncovered during discovery, along with legal fees and interest[5].
This legal action underscores the ongoing efforts to hold parties accountable for the $1.15 billion in funds tied to FTX’s collapse. The outcome could significantly impact the FTX Trust’s ability to return value to creditors, as well as set precedents for similar cases in the cryptocurrency sector. With the FTX bankruptcy proceedings entering a critical phase, the lawsuit against Genesis Digital represents a pivotal step in the trust’s mission to maximize recoveries for stakeholders[1].
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