FTX Sues K5 Global to Recover $700 Million

The lawsuit, submitted on June 22, contains 16 allegations and seeks damages exceeding $700 million from the defendants. In this case, the defendants are incubator and investment firms K5 Global, Mount Olympus Capital, and SGN Albany Capital, along with associated organizations, as well as Michael Kives and Bryan Baum, who are co-owners of K5 Global.

As stated in the legal filing, the former CEO Sam Bankman-Fried attended a networking event by Kives in 2022. During that time, Alameda Research, a cryptocurrency trading company affiliated with FTX, transferred $700 million to Kives, Baum, and K5 Global. However, these transactions were made to appear as if they originated from shell companies, namely SGN Albany and Mount Olympus Capital. This deception became apparent when Bankman-Fried relied on K5’s reputation and business connections to secure financial assistance before FTX’s bankruptcy in November 2022.

The lawsuit revealed that Bankman-Fried disregarded concerns raised by FTX employees regarding K5’s intentions to exploit or deceive the company; instead, he continued to invest in increasing his political and social influence.

In addition, the legal document requests the recovery of assets transferred from Alameda Research to SGN Albany Capital and funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital. These transactions were deemed insufficiently valuable and superfluous.

A shell company under Bankman-Fried’s control allegedly used $214 million from FTX funds to acquire a minority stake in Kendall Jenner’s 818 Tequila brand, despite the tequila company’s assets being valued at just $2.94 million, according to SEC filings.

 

A transaction that can be avoided in the United States through bankruptcy or other regulations is an avoidable transaction. K5 Global, Olympus Capital, SGN Albany, and other parties will contribute $800 million to FTX.

Before filing for bankruptcy, FTX pursued legal action concerning its investment in the stock platform Embed and payments made to Genesis Global Capital, the financially distressed lending division of the cryptocurrency company Genesis. Wednesday, FTX and the Metropolitan Museum of Art achieved an agreement in which the museum agreed to return $550 million in donations received from FTX companies in 2022.

Following the bankruptcy filing, FTX’s new management recovered over $7 billion in assets, which could be used to reimburse clients whose funds were suspended during the bankruptcy.