- FTX has filed a lawsuit against several investment firms it sent money to in 2022
- The lawsuit alleges that FTX sent $700 million in “avoidable” transfers to the funds following a party attended by Sam Bankman-Fried in 2022
- FTX believes it can use the same technique it is trying with Voyager Digital to recover the funds
FTX yesterday initiated legal proceedings against a group of investment firms it says it made “avoidable” transfers to in 2022. The company filed a lawsuit in the United States Bankruptcy Court for the District of Delaware against several investment firms that were previously associated with the company before its collapse aiming to secure compensation of over $700 million from the defendants. The move represents the latest attempt to get money back from third parties, which has included other investment firms and crypto platforms to date.
$700 Million Sent After Party
The defendants mentioned in the lawsuit filing include incubator and investment firm K5 Global, along with Mount Olympus Capital and SGN Albany Capital, as well as their affiliated entities. Additionally, the co-owners of K5 Global, Michael Kives and Bryan Baum, have been named as defendants in the case.
The suit notes the then-CEO of FTX, Sam Bankman-Fried, attended a social event hosted by Kives in 2022, which was attended by “a former Presidential candidate, top actors and musicians, reality TV stars and multiple billionaires”. According to the lawsuit, FTX’s trading wing Alameda Research transferred $700 million to Kives, Baum, and K5 Global following the event, with the transactions orchestrated to appear as if they originated from shell companies, namely SGN Albany and Mount Olympus Capital.
FTX Using Voyager Digital Ploy
The lawsuit aims to reclaim these funds which are alleged to have occurred without receiving an equivalent value, and, importantly, are categorized as avoidable transactions. In the context of U.S. bankruptcy law, an avoidable transaction refers to a transaction that can be reversed under the Bankruptcy Code or other applicable laws, something that FTX has already used to try and claw back funds from Voyager Digital.
Kives, Baum and Bankman-Fried also allegedly developed close personal ties, with Baum even having his own bedroom in the FTX executives’ Bahamas residence, the suit said. After FTX’s collapse, “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).”
