FTX Recovery Trust Files Lawsuit to Recover $1.15 Billion in Misappropriated Funds Tied to Sam Bankman-Fried

The FTX Recovery Trust, tasked with recovering funds for the fallen cryptocurrency exchange’s creditors, has filed a lawsuit seeking to recover over $1.15 billion that was allegedly misappropriated and spent by former CEO Sam Bankman-Fried (SBF). The lawsuit targets Genesis Digital Assets (GDA), a crypto mining company, its affiliates, and two of its co-founders.

The complaint, filed Monday in the US Bankruptcy Court for the District of Delaware, is part of the broader effort to reclaim funds associated with SBF’s fraudulent activities during his time running FTX in 2021 and 2022. According to the court documents, the misappropriated funds were used to purchase inflated shares of Genesis Digital Assets, a company primarily involved in crypto mining.
Alleged Overpayment for Genesis Shares
The filing claims that SBF directed Alameda Research, FTX’s sister company, led by Caroline Ellison, to buy GDA shares at inflated prices. Specifically, Alameda allegedly spent over $500 million to acquire 154 preferred shares of GDA and $550.9 million to purchase additional shares directly from the company’s co-founders, Rashit Makhat and Marco Krohn.

“By 2021, Bankman-Fried had already caused billions of dollars of customer funds to be diverted from the FTX.com exchange to Alameda,” the complaint stated. Despite Alameda’s mounting debt to FTX.com, Bankman-Fried allegedly caused Alameda to pay over $1.15 billion for overvalued GDA shares.

The lawsuit alleges that the purchases were intended to benefit Bankman-Fried personally, as he owned 90% of Alameda. This would have allowed him to capture the upside from GDA’s inflated valuation, while externalizing the losses to FTX creditors and customers.
As noted in the filing: “The Transfers were designed to benefit Bankman-Fried personally…while at the same time externalizing the losses to the FTX Group’s creditors and customers.”

The complaint further claims that SBF relied on misleading financial documents provided by Genesis Digital that were said to have no correlation to the company’s actual financial state. At the time, Genesis Digital was based in Kazakhstan, which was experiencing an energy crisis, leading to a potentially unsustainable operation for the company.
FTX’s Ongoing Efforts to Recover Funds
The lawsuit against Genesis Digital comes as part of FTX Recovery Trust’s broader efforts to recover misappropriated funds following the exchange’s collapse and bankruptcy filing in 2022. Some of FTX’s top executives, including Sam Bankman-Fried, have already faced legal consequences, with Bankman-Fried currently serving time in prison.

In addition to the Genesis Digital lawsuit, the FTX Recovery Trust has made notable strides in recovering assets for creditors. In 2023, a bankruptcy court approved a $175 million settlement with Genesis Global Trading, a separate entity from Genesis Digital Assets, to compensate FTX creditors.

Since FTX’s bankruptcy proceedings began, the FTX Recovery Trust has started distributing funds to creditors. The first $1.2 billion payout was issued in February 2023, followed by a $5 billion distribution in May 2023. The next $1.6 billion payout is scheduled for September 30, 2025, marking another significant step in the ongoing efforts to reimburse FTX customers and creditors affected by the exchange’s collapse.