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 Bitcoin mining firm, alleging fraudulent transfers of funds from FTX’s bankruptcy estateFTX Trust sues Genesis Digital for $1.15 billion^[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 2022FTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner Genesis Digital^[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 timeFTX Trust sues Genesis Digital over $1.15B transfers^[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 transfersFTX Trust sues Genesis Digital for $1.15 billion^[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 DigitalFTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner 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 viabilityFTX Trust sues Genesis Digital over $1.15B transfers^[3]. The trust further contends that Makhat and Krohn personally benefited, selling $550.9 million of their own shares to Alameda during the transactionsFTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner Genesis Digital^[2]. These actions, the trust argues, exacerbated the financial instability of FTX, which collapsed in 2022, and deprived creditors of recoverable assetsFTX Trust sues Genesis Digital for $1.15 billion^[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 energyFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 industryFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 investmentsFTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner Genesis Digital^[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 unsustainableFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 fraudFTX Trust sues Genesis Digital over $1.15B transfers^[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 GroupFTX Trust sues Genesis Digital over $1.15B transfers^[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, 2025FTX Trust Sues Genesis To Recover $1 Billion Allegedly Misappropriated By SBF^[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 expenseFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 worsenedFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 operationsFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[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 interestFTX Trust Sues Genesis To Recover $1 Billion Allegedly Misappropriated By SBF^[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 stakeholdersFTX Trust sues Genesis Digital for $1.15 billion^[1].