Cryptocurrency exchange FTX has recently lodged a lawsuit in the United States Bankruptcy Court for the District of Delaware against several investment firms with which it had previous ties. The lawsuit, filed on June 22, encompasses 16 counts and aims to recover over $700 million from the defendants.
FTX demands $700 million from the defendants
Among the named defendants in the lawsuit filing are K5 Global, an incubator and investment company, Mount Olympus Capital, and SGN Albany Capital, along with affiliated entities and individuals such as Michael Kives and Bryan Baum, co-owners of K5 Global. Notably, Michael Kives, a former agent for the CAA talent agency and a former aide to Hillary Clinton, hosted a social event in 2022 attended by FTX’s then-CEO, Sam Bankman-Fried (SBF). The lawsuit highlights the gathering as a high-profile affair, with notable guests including a former Presidential candidate, prominent actors, musicians, reality TV stars, and multiple billionaires.
According to the lawsuit, Alameda Research, a crypto trading firm associated with FTX, allegedly transferred $700 million to Kives, Baum, and K5 Global. However, the transactions were purportedly structured to appear as if they originated from shell companies, namely SGN Albany and Mount Olympus Capital.
The primary objective of the lawsuit is to recover the funds transferred from Alameda Research to SGN Albany Capital, as well as the funds subsequently transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital. The suit argues that these transfers were carried out “without receiving equivalent value” and were deemed avoidable. Under U.S. bankruptcy law, an avoidable transaction refers to one that can be reversed per the Bankruptcy Code or other applicable laws.
The lawsuit uncovered personal relationships and collusion
The lawsuit also reveals close personal relationships between Kives, Baum, and SBF. It states that Baum had his bedroom in the FTX executives’ residence in the Bahamas. Following the collapse of FTX, Kives, and Baum allegedly collaborated with Bankman-Fried on a strategy to secure a bailout for the FTX Group while safeguarding their interests.
The lawsuit encompasses nine counts related to the fund transfers. Kives and Baum personally face charges of aiding and abetting breach of fiduciary duty and dishonest assistance, while SGN Albany Capital is charged with unjust enrichment.
FTX’s legal action sheds light on the intricate connections and financial transactions that took place between the exchange, its affiliated entities, and the named defendants. By pursuing this lawsuit, FTX aims to recover significant funds it believes were inappropriately transferred and seeks to hold the defendants accountable for their alleged roles in these transactions. The outcome of the lawsuit will be closely watched, as it may have significant implications for both the cryptocurrency industry and the individuals involved.