FTX Recovery Trust Files Lawsuit Against Genesis Digital to Retrieve $1.15 Billion
The FTX Recovery Trust has initiated a legal case against Genesis Digital Assets along with multiple individuals associated with the firm. They’re requesting the court’s assistance to recover approximately $1.15 billion that they suspect was transferred under dubious conditions. The case is being processed in the US Bankruptcy Court in Delaware and relates to the continuing repercussions of FTX’s collapse.
Trust’s Allegations
As outlined in the filing, Sam Bankman-Fried allegedly utilized funds from his hedge fund Alameda Research to invest in Genesis Digital. However, the prices he paid significantly exceeded the actual trading market value of the company, according to the trust.
BREAKING:
The FTX Bankruptcy Trust has filed a lawsuit for $1.15 billion against Genesis Digital Assets, a Bitcoin block rewards company.
— Rayan Shahid
(@CallmeRaynn) September 23, 2025
The acquisitions occurred between August 2021 and April 2022. They assert that the funds originated directly from user accounts on FTX.com. The complaint explicitly mentions Genesis Digital’s founders, Rashit Makhat and Marco Krohn.
Presence of Red Flags
The lawsuit indicates that there were numerous warning signs indicating the transaction was perilous. For starters, Kazakhstan’s power grid was already under pressure due to BTC miners migrating there following China’s prohibition, with Genesis Digital significantly involved in the area. Moreover, the company’s financial statements had not been audited. Additionally, reports also connected them to potential tax complications and money laundering allegations.
Regardless of these issues, the investment proceeded. Shortly thereafter, the company’s valuation soared from $3.25 billion to a peak of $12.2 billion, which raised concerns within the company itself. One board member reportedly described the valuation increase as “absurd and unmarketable.”
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Founders Allegedly Profited
The trust claims that Genesis Digital’s founders sold around $551 million of their own shares to Alameda during a period when FTX’s financial stability was already deteriorating. The complaint asserts that this occurred at a cost to FTX users, with the shares being valued much higher than they should have been. The lawsuit contends this was a strategy for the founders to exit a failing entity while capitalizing on misappropriated user funds.
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Significance of the Case
This represents a component of a broader initiative to retrieve lost assets following FTX’s shocking downfall in 2022. The trust’s objective is to identify suspicious transactions and endeavor to return those resources to the individuals and entities that are still owed funds. A favorable outcome in this lawsuit could restore a substantial amount of those funds to creditors who have been seeking clarity and repayment.
What Lies Ahead
The forthcoming actions rely on how Genesis Digital and the implicated parties react. They may contest the accusations in court or attempt to reach a settlement. Regardless, the result could establish a significant precedent regarding the treatment of crypto-related fraud in bankruptcy proceedings. Other corporations and regulators will likely monitor developments closely, particularly if the court determines that these types of exaggerated transactions can be reversed. The repercussions could extend to how transactions are struck and assessed in the crypto sector moving forward.
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Key Takeaways
- The FTX Recovery Trust is pursuing Genesis Digital Assets to reclaim $1.15 billion related to alleged mismanagement of user funds.
- Sam Bankman-Fried is accused of utilizing Alameda Research resources to excessively pay for stakes in Genesis Digital from 2021 to 2022.
- Alarm bells included lack of audits, energy shortages in Kazakhstan, and internal worries regarding the company’s rapidly soaring valuation.
- Allegedly, Genesis Digital’s founders sold over $550 million of their shares to Alameda amid FTX’s financial crisis.
- The lawsuit could impact how courts address inflated crypto transactions and may establish a precedent for bankruptcy recoveries in the future.
The post FTX Recovery Trust Sues Genesis Digital to Recover $1.15 Billion appeared first on 99Bitcoins.
