FTX is starting the clawback process as it scrambles to come up with the funds to pay off creditors in its bankruptcy proceedings. The now-shuttered exchange filed a lawsuit against some of the investment firms and individuals founder Sam Bankman-Fried rubbed shoulders with before his arrest.
In a suit filed in the United States Bankruptcy Court for the District of Delaware Thursday, FTX claims its affiliate Alameda Research wired $700 million to investment firms K5 Global, Mount Olympus Capital and SGN Albany Capital. The suit also names affiliated shell companies and K5 Global co-owners Michael Kives and Bryan Baum.
In the complaint, FTX claims Bankman-Fried became close with Kives and Baum in February 2022, attending dinner parties and the 2022 Super Bowl together and with other high-rollers. Bankman-Fried was interested in utilizing the pair’s connections, the suit says.
“In an internal note that Bankman-Fried drafted just two days [after the Super Bowl], he gushed about Kives’s access to celebrities and politicians, describing him as ‘probably, the most connected person I’ve ever met,’” the complaint noted.
“Bankman-Fried stated that Kives and Baum were ‘something of a one-stop shop for relationships that we should utilize,’ and that they could provide ‘infinite connections,’ ‘[p]otential unpaid partnerships with celebrities’ and ‘[p]olitical relationships,’ and that they and FTX entities could ‘work together on electoral politics,’” the complaint continued.
In the lawsuit, FTX alleges Kives, Baum and their affiliates received the funds “without receiving equivalent value.” FTX requests the funds be returned.
The case is the first in what experts predict will be a long line of clawback attempts. Some politicians who received campaign donations from Bankman-Fried and his companies have already been asked by the Department of Justice to hand over funds.
Many politicians announced publicly that they would be donating the campaign contributions they received from Bankman-Fried after the alleged fraud was uncovered.
Sen. Dick Durbin, D-Ill., and Rep. Jesús “Chuy” García, D-Ill., said in November, days after FTX’s bankruptcy filing, that they would donate the $2,900 they each received from Bankman-Fried.
Rep. Ritchie Torres, D-N.Y., told Blockworks in late November he had already donated his contributions to “a local charity to assist with holiday food distribution to families in need.”
Charities are not exempt from clawbacks, Jason Lilien, partner at Loeb and Loeb, said around the same time.
Surrendered and clawed-back funds typically go toward repaying customers, victims and creditors.
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Source: https://blockworks.co/news/ftx-attempts-700m-clawback