FTX Trust filed a lawsuit against Genesis Digital, a former partner of the shuttered exchange. The Trust aims to claw back some $1.15 billion in lost funds, claiming that the transfers were fraudulent.
This isn’t the first lawsuit of this nature, as the Trust attempted to press similar charges against Binance last month. It’s unclear if this legal move will yield significant results.
FTX Trust Sues Genesis
The FTX collapse of late 2022 has left a lingering influence over the crypto industry, as the ongoing creditor reimbursement process affects market behavior. Therefore, FTX Trust’s new lawsuit against Genesis Digital, a former partner, is turning a lot of heads.
SponsoredThis new FTX lawsuit alleges that Genesis was the beneficiary of fraudulent transactions taken by former CEO Sam Bankman-Fried. It aims to claw back some of these lost funds, claiming that these decisions benefited Bankman-Fried’s own interests as opposed to his company’s:
“Bankman-Fried caused Alameda to purchase several tranches of shares in [Genesis Digital Assets], a Bitcoin mining firm, at outrageously inflated prices. Genesis Digital stands as one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds,” the filing claimed.
Specifically, Bankman-Fried was on Genesis’ board at the time, resigning from it one day before FTX filed for bankruptcy.
By isolating the firm’s previous leader from the fiscal interest of FTX and its creditors, the Trust hopes to use this connection to claim that the transfers were fraudulent.
Clawback Lawsuits
Considering that FTX Trust is liable for huge reimbursement rounds, this Genesis lawsuit is a fairly reasonable strategy. Last month, the Trust filed similar charges against Binance, aiming to claw back $1.76 billion from the exchange.
CZ, its former CEO, asked a US bankruptcy court to dismiss the suit.
It’s unclear whether the courts will cooperate with today’s argument. Although Genesis Digital has gotten in hot water with the federal government on several occasions, a civil lawsuit from FTX is very different.
Sure, Bankman-Fried was convicted of many crimes during his time as CEO, but he’s currently incarcerated. Can the Trust simply invalidate all of his choices?
FTX Trust is pursuing all available avenues. The lawsuit’s outcome is highly uncertain, but the effort alone shows the Trust’s commitment to making its creditors whole again.
