The FTX Recovery Trust has initiated a major lawsuit against Bitcoin mining firm Genesis Digital Assets, seeking to recover approximately $1.15 billion in allegedly misappropriated funds. The legal action represents one of the largest clawback attempts in the ongoing FTX bankruptcy proceedings.
According to court documents filed this week, the trust alleges that former FTX CEO Sam Bankman-Fried directed substantial investments into Genesis Digital Assets using commingled customer funds. The complaint contends these transactions occurred during 2022, when FTX was actively expanding its cryptocurrency portfolio investments.
The lawsuit specifically targets four separate transactions where FTX entities transferred funds to Genesis Digital Assets. Legal representatives for the recovery trust argue these investments constituted fraudulent transfers under bankruptcy code provisions, as they were made with customer assets rather than corporate funds.
Genesis Digital Assets, founded in 2013, operates Bitcoin mining facilities across multiple countries and had received significant venture funding prior to the FTX investments. The mining company had previously positioned itself as a beneficiary of FTX’s strategic investment portfolio.
This legal action follows multiple similar recovery efforts by the FTX estate as it attempts to maximize returns for creditors. The trust’s legal team emphasized their commitment to pursuing all available avenues for fund recovery, noting this case involves one of the largest single investment relationships from the former exchange’s portfolio.
The outcome of this litigation could establish important precedents for bankruptcy proceedings involving commingled funds in the cryptocurrency sector. Both legal teams are preparing for what promises to be a complex litigation process involving detailed forensic accounting of fund flows.
