FTX plans to recoup $700 million from friends and affiliated funds of SBF
June 23, 2023 6:18 AM
According to the lawsuit, hundreds of millions of dollars in "avoidable" transactions were made from Alameda to investment firm K5 Global during a Hollywood dinner party.
FTX has filed a case in the United States Bankruptcy Court for the District of Delaware against several of the investment firms with which it had dealings prior to its demise. The action, filed on June 22, includes 16 counts and demands more than $700 million in damages from the defendants.
The incubator and investment firm K5 Global, Mount Olympus Capital, and SGN Albany Capital, as well as connected organizations including K5 Global co-owners Michael Kives and Bryan Baum, are named as defendants in the complaint filing. Kives is a former CAA talent agent and Hillary Clinton's former adviser. The claim stated that in 2022, the then-CEO of FTX, Sam Bankman-Fried, also known as (SBF), attended a social gathering thrown by Kives:
"As one might expect from a "super-networker" of Kives's stature, the guest list featured a past Presidential contender, prominent actors and artists, reality TV stars, and many millionaires."
According to the lawsuit, Alameda Research, an FTX-affiliated crypto trading firm, transferred $700 million to Kives, Baum, and K5 Global, but they disguised the transactions as originating from shell companies SGN Albany and Mount Olympus Capital.
The suit demands the recovery of funds transferred from Alameda Research to SGN Albany Capital, as well as funds transferred to Mount Olympus Capital from Kives, Baum, and SGN Albany Capital.
The transfers were regarded as being made "without receiving equivalent value" and, more importantly, as being unnecessary. An avoidable transaction is one that can be reversed under the Bankruptcy Code or other statutes in the United States.
It was claimed in the lawsuit that personal ties formed between Kives, Baum, and SBF, to the extent that Baum was given his own bedroom in the Bahamas home of the FTX executives. Following the demise of FTX, "Kives and Baum collaborated behind the scenes with Bankman-Fried on a plan to find somebody to bail out the FTX Group (and protect their golden goose)."
K5 is a venture capital organization that has invested in over 140 different businesses and manages over $1 billion in assets (not including funds received from SBF or his associates). A spokeswoman for Sam Bankman-Fried and Alameda claimed that in the middle of 2022, the two companies invested $400 million in funds managed by K5 through the purchase of a third of the general partnership for a total of $1 billion in cash and stock.
"As is the case with many others, K5 believed they were dealing with a reputable company when they entered into a business partnership with SBF. According to us, this case is completely baseless."
The suit's nine charges addressed fund transfers. Personal charges of assisting and abetting violation of fiduciary responsibility and dishonest assistance were filed against Kives and Buam, and a corporate allegation of unjust enrichment was filed against SGN Albany Capital.