FTX Recovery Trust Targets Genesis Digital in Massive $1.15B Fraudulent Transfer Lawsuit

Another day, another billion-dollar crypto courtroom drama—because who needs traditional due diligence when you've got digital assets?

The Legal Reckoning

FTX's cleanup crew slams Genesis Digital with a lawsuit claiming $1.15 billion vanished in suspicious transfers. The recovery trust isn't playing nice—they want every last digital cent back.

Follow the Money Trail

Court documents reveal a pattern of transactions that would make even seasoned Wall Street bankers blush. The trust alleges systematic movement of funds that crossed every ethical line in the blockchain.

Industry Fallout

This lawsuit sends shockwaves through crypto mining circles—Genesis Digital operated one of the largest Bitcoin mining fleets before FTX's collapse. Now their financial plumbing gets the forensic treatment.

Just another reminder that in crypto, the 'trust' part often arrives after the 'bailout'—usually via subpoena.

Kazakhstan operations and warning signs

Genesis Digital operated as a bitcoin mining firm based in Kazakhstan, benefiting from political connections to former president Nursultan Nazarbayev and access to inexpensive energy.

The company faced mounting challenges throughout 2021 as China’s crackdown on Bitcoin mining drove miners to Kazakhstan, straining the country’s electric grid.

The lawsuit alleged that multiple warning signs preceded Bankman-Fried’s investment, including Kazakhstan’s energy crisis, lack of interest from other major investors, unaudited financial records, and reports linking Genesis Digital to money laundering and tax evasion.

Additionally, the filing stated that Bankman-Fried ignored these red flags while proceeding with the investment. Genesis Digital’s valuation increased dramatically from $3.25 billion in July 2021 to between $8.3 billion and $12.2 billion by November of the same year.

According to the filing, one board member described the valuation surge as “insane and off-market. ”

Bankman-Fried traveled to Kazakhstan in December 2021 to meet President Kassym-Jomart Tokayev in an attempt to address concerns about crypto mining operations. The diplomatic effort failed to resolve the industry’s mounting regulatory and energy challenges.

The investment allowed Genesis Digital founders Makhat and Krohn to sell nearly $551 million of their personal shares directly to Alameda Research, enabling them to “cash out of a failing company,” according to the complaint.

The lawsuit characterized Genesis Digital as “one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds.”