FTX seeks to claw $700M from Bankman Fried friends and affiliated funds

June 23, 2023 admin

After a Hollywood dinner party, hundreds of millions of dollars of “avoidable” transfers were sent from Alameda to investment firm K5 Global, the suit alleges.

FTX has filed a lawsuit in the United States Bankruptcy Court for the District of Delaware against some of the investment firms it had ties to before its collapse. The suit, filed June 22, contains 16 counts and seeks over $700 million from the defendants.

The lawsuit filing names as defendants incubator and investment company K5 Global, Mount Olympus Capital and SGN Albany Capital, as well as affiliated entities and K5 Global co-owners Michael Kives and Bryan Baum. Kives is a former agent for the CAA talent agency and a former aide to Hilary Clinton. The suit noted the then-CEO of FTX, Sam Bankman-Fried (SBF), 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.”

Subsequently, the suit alleged, FTX-affiliated crypto trading firm Alameda Research transferred $700 million to Kives, Baum and K5 Global, but they constructed the deals as coming from shell companies SGN Albany and Mount Olympus Capital.

The suit seeks 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 transfers were described as being carried out “without receiving equivalent value” and, crucially, as avoidable. In U.S. bankruptcy law, an avoidable transaction is one that can be reversed under the Bankruptcy Code or other laws.

FTX moves to claw back $800 million from K5 Global, Olympus Capital, SGN Albany et al.

Defendants are further accused of aiding and abetting SBF, dishonest assistance and unjust enrichment. pic.twitter.com/IPcDEtuFxL

— FTX 2.0 Coalition (@AFTXcreditor) June 22, 2023

Kives, Baum and SBF also 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).”

‘Lawsuit is without merit,’ says K5

In a statement to Cointelegraph, a spokesperson for K5 Global said the lawsuit is “without merit.”

“K5 is a Venture Capital firm with over $1 billion in assets under management (apart from any funds from SBF and his affiliates) and has investments in 148 companies. In mid-2022 an affiliate of Sam Bankman-Fried and Alameda bought a third of K5’s general partnership for cash and stock, and ultimately made a $400 million investment in certain funds managed by K5,” said the spokesperson

“K5 was under the impression – like many others – that SBF was completely legitimate and they were entering into a fair, long-term, and mutually beneficial business relationship. Our belief is that the lawsuit is without merit.”

Nine of the counts in the suit concerned fund transfers. Kives and Buam were personally charged with aiding and abetting breach of fiduciary duty and dishonest assistance, and SGN Albany Capital was charged with unjust enrichment.

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Update (June 23, 2:45am UTC): This article has been updated with a comment from a K5 spokesperson.