source: AdobeStock / Rafael Henrique
FTX, a cryptocurrency exchange, has filed a lawsuit against investment firm K5 Global and its co-founders, Michael Kives and Bryan Baum, seeking to recover $700 million in investments that it alleges were made with misappropriated FTX funds.
The complaint, filed in Delaware bankruptcy court, alleges that Kives and Baum used their close relationship with FTX founder Sam Bankman-Fried to gain control of the exchange’s treasury and funnel funds into their own projects. The complaint also alleges that Bankman-Fried was aware of the misuse of funds but did nothing to stop it.
FTX claims that the $700 million in investments were made in a variety of projects, including a music streaming company, a cryptocurrency mining operation, and a film production company. The complaint alleges that these investments were “highly speculative” and that they did not generate any profits for FTX.
FTX is seeking to recover the $700 million in investments, as well as damages for breach of fiduciary duty and unjust enrichment. The lawsuit is the latest in a series of legal troubles for FTX. In recent months, the exchange has been the subject of investigations by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission.
The lawsuit against K5 Global and its co-founders is a significant development for FTX. If the exchange is successful in recovering the $700 million in investments, it would be a major win for the company. However, the lawsuit is also likely to draw further scrutiny to FTX and its founder, Sam Bankman-Fried.
The case is still in its early stages, and it is not yet clear how it will be resolved. However, the lawsuit is a sign of the growing regulatory scrutiny of the cryptocurrency industry. As the industry continues to grow, it is likely that we will see more lawsuits like this one.
Now-defunct cryptocurrency exchange FTX has sued a former aide for Hilary Clinton and the former aide’s investment firm, K5 Global, to retrieve $700 million in funds.
On Thursday, the company filed a complaint in Wilmington, Delaware, bankruptcy court, asking back the $700 million its founder Sam Bankman-Fried transferred to K5 entities in 2022.
The lawsuit names K5 Global, Mount Olympus Capital, and SGN Albany Capital, as well as affiliated entities and K5 Global co-owners Michael Kives and Bryan Baum, as defendants.
It claims that Bankman-Fried was a “profligate patron” who sent millions to Kives, K5 Global, and Baum after he attended a social event hosted by Kives in 2022.
“True to Kives’s reputation as a high-profile ‘super-networker,’ the attendees at the dinner party included a former Presidential candidate, top actors and musicians, reality TV stars and multiple billionaires,” the suit said.
According to the complaint, Bankman-Fried described Kives as “probably, the most connected person I’ve ever met,” and “a one-stop shop” for political relationships and celebrity partnerships.
The suit claimed that while FTX-affiliated crypto trading firm Alameda Research transferred the funds to Kives, Baum, and K5 Global, it did so as coming from shell companies SGN Albany and Mount Olympus Capital.
In one poor investment, according to the complaint, a Bankman-Fried-controlled shell company used $214 million in funds from FTX to buy a minority stake in Kendall Jenner’s 818 Tequila brand, at a time when the tequila company’s assets were valued at just $2.94 million in its filings with the US Securities and Exchange Commission.
FTX has sought the return of funds transferred from Alameda Research that ended up in SGN Albany Capital and funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital.
The suit described the transfers as being carried out “without receiving equivalent value” and, more importantly, avoidable, meaning that they can be reversed under the Bankruptcy Code or other laws.
The complaint even claimed that “Kives and Baum worked behind the scenes with Bankman-Fried on a strategy to find someone to bail out the FTX Group (and to protect their golden goose)” after the crypto exchange collapsed.
FTX Costs Increase as Bankruptcy Process Lingers
While FTX is struggling to retrieve every bit of money it can, the bankrupt crypto exchange is facing escalating legal and advisory costs.
According to filings submitted by the exchange’s bankruptcy advisors, the advisors have billed the company a staggering $121.8 million in fees and expenses for the period between February 1 and April 30.
In another bid to raise funds for users, bankers of FTX are looking to offload their stake in AI startup Anthropic.
Perella Weinberg, the boutique bank overseeing FTX’s bankruptcy proceedings, is reportedly discussing the potential sale of Anthropic’s stake with interested parties.
FTX ostensibly owned as much as $500 million worth of shares in Anthropic when it filed for bankruptcy last year. However, courtesy of the recent AI boom and rising demand for AI technologies, Anthropic has experienced significant growth as of late.
Therefore, the sale of the stake is expected to fetch a nine-figure sum, which would be distributed to former FTX customers.
