FTX Trust Demands $1 Billion from Genesis in Explosive Lawsuit Over SBF’s Alleged Misappropriation

FTX's bankruptcy trust launches nuclear option against Genesis—demanding immediate return of $1 billion in allegedly misappropriated funds.

The Legal Onslaught Begins

FTX's trust isn't just knocking on Genesis' door—it's kicking it down. The lawsuit claims Sam Bankman-Fried's operation systematically diverted client assets through Genesis in a sophisticated shell game. Trustees argue Genesis served as a pipeline for moving funds between FTX entities while maintaining the appearance of legitimate operations.

Following the Money Trail

Court documents reveal meticulous tracing of transactions showing funds flowing from FTX customer accounts to Genesis, then disappearing into the crypto ether. The $1 billion figure represents just the identifiable misappropriation—investigators suspect the actual total could be significantly higher.

Genesis' Precarious Position

This lawsuit lands while Genesis already navigates its own bankruptcy proceedings. The dual bankruptcy scenario creates a legal maze that could take years to untangle. Creditors from both camps watch anxiously as the battle over remaining assets intensifies.

Because nothing says 'financial innovation' like old-fashioned alleged embezzlement on blockchain steroids.

FTX Trust’s Pursuit Of Fraudulent Transfers

The lawsuit alleges that a significant portion of the disputed funds originated from customer deposits at the FTX.com exchange. The FTX Recovery Trust contends that Bankman-Fried’s transactions with Genesis Digital were “typical examples of fraudulent transfers.”

In 2021, as Bankman-Fried orchestrated these dealings, he stood to gain significantly while risking nothing, since the shares he acquired in Genesis were ultimately held by Alameda Research, where he was a 90% owner.

The complaint outlines a series of claims under US bankruptcy law, asserting that the transfers in question should be deemed avoidable fraudulent transfers under relevant statutes. 

Third Distribution Looms

The trust is seeking not only the recovery of the $1.15 billion but also additional amounts that may be uncovered during the discovery process. Furthermore, the lawsuit requests the reimbursement of attorneys’ fees, interest, and other costs associated with the legal proceedings

This legal maneuver comes as the FTX Recovery Trust prepares for its third distribution to creditors impacted by the collapse of the exchange, with payments scheduled to begin on September 30, 2025. 

At the time of writing, the collapsed exchange’s native token, FTT, trades at $0.82, after skyrocketing above $1 last week. 

Featured image from CNBC, chart from TradingView.com