FTX Trust Targets Genesis in $1.15B Fraud Clawback Battle

The FTX Recovery Trust has filed a $1.15 billion lawsuit against Genesis Digital Assets, a Bitcoin mining firm, 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, claims that Alameda Research, Bankman-Fried’s hedge fund, used misappropriated FTX funds to purchase inflated shares in Genesis Digital between August 2021 and April 2022. The trust argues that these transactions enriched Bankman-Fried and Genesis co-founders Rashit Makhat and Marco Krohn, who received $470 million and $80.9 million, respectively, from share sales in February 2022FTX Trust Sues Genesis Digital for $1.15B Clawback Over Alleged ...^[1].

The lawsuit outlines a systematic diversion of funds, with Alameda investing $1.15 billion across four rounds: $100 million in August 2021, $550 million in January 2022, $250 million in February 2022, and $250 million in April 2022. The trust contends that these investments were made at “outrageously inflated prices” and provided negligible value to FTX’s insolvency estate. Internal communications cited in the filing describe the valuations as “insane and off-market,” while contemporaneous risks—including energy shortages in Kazakhstan and underdeveloped U.S. data centers—raised doubts about Genesis’s operational viabilityFTX Trust sues Genesis Digital for $1.15 billion^[2].

Legal claims are grounded in both federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act, with the trust alleging actual and constructive fraud. The complaint highlights that Genesis, a politically connected miner in Kazakhstan, benefited from favorable treatment under Nursultan Nazarbayev, including access to low-cost energy. However, by late 2021, Kazakhstan’s power grid faced strain from an influx of miners, new taxes, and social unrest, undermining the firm’s long-term prospects. Despite these risks, Bankman-Fried proceeded with the investments, ignoring red flags such as unaudited financials and money laundering concernsFTX Trust Sues Crypto Miner Genesis Digital Over $1.15 Billion^[3].

This litigation is part of the FTX Trust’s broader asset recovery campaign, which has already distributed $6.2 billion to creditors. Previous distributions include $1.2 billion in February 2025, $5 billion in May 2025, and an additional $1.6 billion scheduled for September 30, 2025. The Genesis lawsuit adds complexity to the trust’s efforts, as it seeks to claw back funds from a company that expanded its mining operations to 500 megawatts across 20 global data centers. The trust also contends that Genesis’s U.S. subsidiaries, including entities like Dog House TX-1 and White Deer LLC, operate as “alter egos” of the parent company, potentially exposing the entire corporate structure to claims under fraudulent transfer statutesFTX Trust sues Genesis Digital over $1.15B transfers^[4].

The case underscores the ongoing fallout from FTX’s collapse. Bankman-Fried, serving a 25-year prison sentence after being convicted of fraud and conspiracy, resigned from Genesis’s board just days before FTX’s November 2022 bankruptcy. The trust has previously secured a $175 million settlement with Genesis Global, a subsidiary of Digital Currency Group, but the current lawsuit targets direct transfers to Genesis Digital. With oral arguments for Bankman-Fried’s appeal scheduled for November 4, 2025, the litigation landscape remains fluid as creditors pursue recovery across multiple jurisdictions and corporate entitiesFTX Trust Files $1.15 Billion Lawsuit Against Bitcoin Miner …^[5].