FTX Trust Sues Genesis Digital Assets for $1.15 Billion Customer Fund Recovery

TLDR

• FTX Recovery Trust filed a lawsuit against Genesis Digital Assets seeking to recover $1.15 billion allegedly misappropriated from customer deposits
• The funds were transferred through Alameda Research in 2021-2022, with over half going directly to Genesis Digital’s co-founders
• Sam Bankman-Fried allegedly directed these investments at “insane and off-market” valuations despite red flags about the mining company
• The lawsuit claims the transfers were designed to benefit Bankman-Fried personally while externalizing losses to FTX customers
• This adds to ongoing efforts by the FTX Recovery Trust to claw back funds, following $6.2 billion already distributed to creditors

The FTX Recovery Trust has filed a major lawsuit against Bitcoin mining company Genesis Digital Assets Ltd. and its co-founders. The bankruptcy trust seeks to recover $1.15 billion that it claims was misappropriated from FTX customer deposits.

The complaint was filed on September 22 in the US Bankruptcy Court for the District of Delaware. It was assigned as Adversary Case No. 25-52358 under Judge Karen B. Owens.

According to court documents, the disputed funds were transferred through Alameda Research during 2021 and 2022. More than half of the $1.15 billion went directly to Genesis Digital’s co-founders Rashit Makhat and Marco Krohn.

The lawsuit alleges that former FTX CEO Sam Bankman-Fried directed these investments despite obvious warning signs. Internal communications cited in the filing describe the valuations paid as “insane and off-market.”

The trust argues that Bankman-Fried caused Alameda to purchase Genesis Digital shares at inflated prices. This included more than $500 million for 154 preferred shares and an additional $550.9 million sent directly to the co-founders.

Investment Red Flags Ignored

The complaint details several concerning factors that should have deterred investment in Genesis Digital Assets. The company was based in Kazakhstan, which was experiencing an energy crisis at the time.

Genesis Digital allegedly provided financial documents to Bankman-Fried that “bore no relation to reality.” The filing also mentions concerns about unbuilt US data centers that raised questions about the miner’s true prospects.

Despite these red flags, Bankman-Fried proceeded with the investments using customer funds. The trust claims these transfers were designed to benefit Bankman-Fried personally as the 90% owner of Alameda.

The lawsuit argues that Bankman-Fried stood to capture nearly all potential upside from the investments. Meanwhile, losses would be externalized to FTX customers and creditors.

By 2021, billions of dollars in customer funds had already been diverted from FTX.com to Alameda Research. The Genesis Digital investments came despite Alameda’s ballooning debt to the exchange.

Legal Claims and Recovery Efforts

The FTX Recovery Trust is pursuing claims under federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act. The lawsuit alleges both actual and constructive fraud in the transfers.

This legal action adds to the complex web of litigation following FTX’s collapse in 2022. The exchange filed for bankruptcy after revelations about misappropriated customer funds.

The trust has already secured some recoveries for creditors through previous settlements. In 2023, a bankruptcy court approved a $175 million settlement with Genesis Global Trading, which is unrelated to Genesis Digital Assets.

Customer Reimbursement Progress

The FTX Recovery Trust has made progress in returning funds to affected customers and creditors. Reimbursements began in February 2025 after more than two years in bankruptcy proceedings.

The recovery plan started with a $1.2 billion payout for claimants in February. This was followed by a larger $5 billion distribution in May 2025.

The trust is expected to unlock an additional $1.6 billion for creditors on September 30, 2025.

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