FTX Recovery Trust Sues Genesis Digital for $1.15B, Alleges Fraud
FTX Recovery Trust has filed a $1.15 billion clawback lawsuit against Genesis Digital Assets in the US Bankruptcy Court for the District of Delaware. The complaint alleges that former CEO Sam Bankman-Fried used commingled customer funds via Alameda Research and direct transfers at inflated valuations to inject over $1 billion into GDA. Specifically, Alameda bought more than $500 million in preferred shares, while $550.9 million was funneled to co-founders Rashit Makhat and Marco Krohn. The suit cites Genesis’s operations in Kazakhstan amid an energy crisis and unreliable financial statements as warning signs of fraud. This action follows a $175 million settlement with Genesis Global Trading and forms part of efforts to return over $6 billion to creditors. Creditors have received distributions since February, but disputes continue over valuation dates versus current Bitcoin prices, which have jumped from $20,000 to over $90,000.
Bearish
The $1.15 billion clawback lawsuit against Genesis Digital underscores regulatory and legal risks in the crypto sector. Traders may react with caution as large-scale fund recoveries signal potential asset freezes and increased scrutiny. Short term, uncertainty around customer fund restitution and ongoing valuation disputes could weigh on Bitcoin sentiment. In the long term, successful recoveries may bolster trust, but the immediate effect is likely negative for market stability and risk appetite.