SBF's Self-Dealing Unveiled: FTX Trust Sues Genesis for $1.15B in Fraudulent Investments

The FTX Recovery Trust has filed a $1.15 billion lawsuit in the U.S. Bankruptcy Court for the District of Delaware against Genesis Digital Assets, a Kazakhstan-based Bitcoin mining firm, alleging fraudulent transfers of FTX customer funds orchestrated by former CEO Sam Bankman-Fried. The complaint, assigned as Adversary Case No. 25-52358 under Judge Karen B. Owens, claims that Bankman-Fried directed Alameda Research—FTX’s sister trading firm—to invest in Genesis Digital shares at “outrageously inflated prices” between August 2021 and April 2022title1^[1]. These investments, totaling $1.15 billion across four tranches, were allegedly funded by misappropriated customer deposits, with over half of the proceeds—$550.9 million—transferred directly to co-founders Rashit Makhat and Marco Krohntitle2^[2]. The trust argues that the transactions enriched Bankman-Fried, who owned 90% of Alameda, while FTX customers and creditors bore the lossestitle3^[3].

Court documents reveal that Bankman-Fried joined Genesis Digital’s board in October 2021, positioning himself to oversee what the trust characterizes as one of Alameda’s “most reckless investments with commingled and misappropriated funds”title4^[4]. The lawsuit highlights internal communications describing the valuations as “insane and off-market,” alongside red flags such as Kazakhstan’s energy crisis, unaudited financials, and money laundering concernstitle5^[5]. Despite these risks, Alameda invested $100 million in August 2021, $550 million in January 2022, $250 million in February, and $250 million in April 2022, with the trust alleging the funds originated from FTX.com customer depositstitle6^[6].

The legal action is grounded in federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act, which allow the trust to pursue “avoidance actions” to recover pre-bankruptcy transfers. The complaint asserts that the transactions were structured to benefit Bankman-Fried personally, externalizing risks to FTX creditors. Notably, Bankman-Fried resigned from Genesis Digital’s board one day before FTX’s November 2022 bankruptcy filingtitle7^[7]. The trust also claims the mining company’s U.S. subsidiaries, including entities like Dog House TX-1 and Mother Whale LLC, operate as “alter egos” of the parent company, potentially exposing the entire corporate structure to clawback claimstitle8^[8].

This lawsuit represents the latest phase of the FTX Recovery Trust’s broader asset recovery campaign. To date, the trust has distributed $6.2 billion to creditors across three tranches, including $1.2 billion in February 2025 and $5 billion in May 2025, with an additional $1.6 billion slated for September 30, 2025title9^[9]. These efforts aim to recover nearly half of the $16.5 billion earmarked for victims of FTX’s collapse. The Genesis Digital case follows a $175 million settlement with Genesis Global Trading earlier this year and a separate $1.76 billion lawsuit against Binancetitle10^[10].

The outcome of the lawsuit could significantly impact the remaining recovery efforts, as the trust seeks to maximize returns for creditors amid ongoing litigation. Bankman-Fried, currently serving a 25-year prison sentence for fraud and conspiracy, faces an appeal scheduled for November 4, 2025title11^[11]. Meanwhile, Genesis Digital, which operates 500 megawatts of mining capacity across 20 global data centers, has explored an initial public offering in the U.S. as recently as July 2024title12^[12]. The mining firm has not publicly responded to the allegations.