FTX Trust Challenges Genesis's $1.15B Inflated Valuation Scheme

The FTX Recovery Trust has filed a $1.15 billion lawsuit against Bitcoin mining firm Genesis Digital Assets, alleging fraudulent transfers of FTX customer funds orchestrated by former CEO Sam Bankman-Fried. The complaint, submitted to the U.S. Bankruptcy Court for the District of Delaware on September 22, 2025, claims that Bankman-Fried directed Alameda Research—his 90% owned hedge fund—to invest in Genesis shares at “outrageously inflated prices” between August 2021 and April 2022. These transactions, the trust argues, diverted $1.15 billion in commingled customer deposits from FTX’s exchange, benefiting Alameda and Bankman-Fried while harming creditorsFTX Trust Sues Genesis Digital for $1.15B Clawback Over Alleged ...^[1]FTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner …^[3].

The lawsuit details four investment rounds totaling $1.15 billion: $100 million in August 2021, $550 million in January 2022, $250 million in February, and $250 million in April 2022. Genesis co-founders Rashit Makhat and Marco Krohn received $470 million and $80.9 million, respectively, from share sales in February 2022, according to court documents. The trust contends that these transactions lacked “reasonably equivalent value” and were executed while FTX was insolvent, violating federal and Delaware state fraudulent transfer lawsFTX Trust Sues Genesis Digital for $1.15B Clawback Over Alleged ...^[1].

The complaint highlights systemic risks tied to Genesis’s operations, including its reliance on Kazakhstan’s energy grid, political connections under Nursultan Nazarbayev, and allegations of money laundering. Despite warnings about energy shortages, unaudited financials, and regulatory scrutiny, Bankman-Fried advanced the investments, which inflated Genesis’s valuation from $3.25 billion in July 2021 to $8.3–$12.2 billion by November 2021. A Genesis board member reportedly called the valuation surge “insane and off-market”.

The FTX Trust’s legal action is part of broader recovery efforts, having already distributed $6.2 billion to creditors through two rounds. A third $1.6 billion payout is scheduled for September 30, 2025, bringing total distributions to $7.8 billion of the $16.5 billion earmarked for victims. The lawsuit adds complexity to Genesis’s corporate structure, which includes U.S. subsidiaries like Dog House TX-1 and Mother Whale LLC, described as “alter egos” potentially exposing the entire entity to clawback claimsFTX Trust Sues Genesis Digital for $1.15B Clawback Over Alleged ...^[1].

Bankman-Fried, serving a 25-year prison sentence after his 2023 conviction on seven felony charges, resigned from Genesis’s board days before FTX’s November 2022 bankruptcy filing. The trust seeks not only the $1.15 billion but also additional assets and legal costs, with oral arguments for Bankman-Fried’s appeal set for November 4, 2025. The case follows a $175 million settlement with Genesis Global earlier this year, underscoring the fractured landscape of FTX-linked liabilitiesFTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner …^[3].