Bankrupt crypto exchange FTX filed a complaint with the court asking to retrieve $700 million from, Michael Kives, a high–profile networker approached by Sam Bankman-Fried, and a company he co-owned, K5 Global, according to a June 22 court filing.
FTX alleges that its founder Sam Bankman-Fried (SBF), pursued the deal to leverage Kives’ high-value network to bolster his political and social influence. Bankman-Fried resigned as FTX CEO in November 2022 and was replaced by John J. Ray III.
SBF, Kives, and Baum’s relationship
FTX described Bankman-Fried as a “profligate patron” of Kives and his co-founder Bryan Baum.
Kives and Baum are co-founders of K5 Global, an investment and incubation firm. Kives wields several powerful connections has represented or worked with multiple public figures and power brokers, including Arnold Schwarzenegger, Katy Perry, Mikhail Gorbachev, Warren Buffett, and both Bill and Hillary Clinton. K5 Global holds stakes in SpaceX, Airbnb, 818 Tequila, and more.
The lawsuit alleged that K5 and FTX entities had a “highly unorthodox, deeply intertwined relationship” with Kives and Baum, who “regularly advis[ed]” Bankman-Fried on investment strategies and were included in internal FTX Slack Channels.
Furthermore, Bankman-Fried described Kives as “probably, the most connected person I’ve ever met,” and “a one-stop shop” for political relationships and celebrity partnerships that could be utilized, according to the complaints.
Additionally, the filing alleges that Bankman-Fried had attended social events hosted by Kives in 2022 with “a former Presidential candidate, top actors and musicians, reality TV stars and multiple billionaires” in attendance.
While FTX executives wondered if Baum was acting in FTX’s best interest, Bankman-Fried allegedly stated that the relationship was “complicated and liminal and unclear.”
When FTX was on the brink of collapse, the lawsuit alleged Kives and Baum worked behind the scene, reaching out to various billionaires, private equity firms, and financiers on Bankman-Fried’s behalf.
“When Bankman-Fried’s fraudulent scheme began to collapse, Kives and Baum worked behind the scenes with Bankman-Fried on a strategy to find someone to bail out the FTX Group (and to protect their golden goose).”
$700 million
According to the lawsuit, Bankman-Fried directed Alameda Research, an FTX-related cryptocurrency trading firm, to transfer a total of $700 million to K5 Global-related entities without making any due diligence about the supposed “investments.”
“Bankman-Fried directed Plaintiffs to make a series of wire transfers totaling $700 million in furtherance of the K5 Transaction and Mount Olympus Transaction.”
These transactions were allegedly disguised as originating from shell companies named SGN Albany and Mount Olympus Capital.
“Plaintiff Alameda Ventures LLC had no ownership stake in either of these entities, and Plaintiff Alameda Research Ltd. owned only approximately 8% of SGN Albany LLC.”
FTX alleged that Bankman-Fried pursued the transactions to burnish his political and social influence and defraud FTX’s customers. The deal handsomely rewarded Kives and Baum with $125 million, respectively.
“Bankman-Fried pursued the K5 Transaction and Mount Olympus Transaction to burnish his own political and social influence. In pursuing these transactions, Bankman-Fried cavalierly agreed to make billion-dollar investments using other people’s money, with no due diligence, and accepted terms that personally enriched Defendants Kives and Baum by excessively overpaying each of them $125 million as part of the K5 Transaction.”
Furthermore, an Bankman-Fried-controlled firm made a $214 million investment to purchase a minority stake in a celebrity-backed tequila brand with assets valued at $2.94 million, according to its filings with the U.S. Securities and Exchange Commission.
Source: https://cryptoslate.com/ftx-files-lawsuit-to-retrieve-700m-from-super-networker-bankman-fried-courted-for-connections/