FTX Files Lawsuit Seeking $700 Million from Former Investment Firms and Associates

Cryptocurrency exchange FTX has filed a lawsuit against several investment firms it was previously associated with before its collapse.

The lawsuit, filed in the United States Bankruptcy Court for the District of Delaware, includes 16 counts and aims to recover over $700 million from the defendants.

The defendants named in the lawsuit filing are K5 Global, an incubator and investment company, as well as Mount Olympus Capital, SGN Albany Capital, and affiliated entities. Additionally, Michael Kives and Bryan Baum, co-owners of K5 Global, are also named as defendants.

The lawsuit alleges that FTX-affiliated crypto trading firm Alameda Research allegedly transferred $700 million to Kives, Baum, and K5 Global.

However, the transactions were structured to appear as if they came from shell companies, namely SGN Albany and Mount Olympus Capital.

The lawsuit seeks the return of funds that were transferred from Alameda Research to SGN Albany Capital and funds that were transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital. These transfers are deemed “without receiving equivalent value” and potentially avoidable under U.S. bankruptcy law.

The lawsuit also highlights the close personal relationships between Kives, Baum, and SBF. It is claimed that Baum even had his own bedroom in FTX executives’ Bahamas residence.

Following FTX’s collapse, the suit alleges that “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).”

In response to the lawsuit, a spokesperson for K5 Global stated that the claims are “without merit.” They emphasized that K5 Global is a reputable venture capital firm with over $1 billion in assets under management and investments in 148 companies.

The spokesperson also mentioned that an affiliate of Sam Bankman-Fried and Alameda had made significant investments in certain funds managed by K5.

This lawsuit is the latest development in the ongoing saga of FTX’s collapse. It remains to be seen whether FTX will be able to recover the funds it is seeking, but the lawsuit is sure to be closely watched by the cryptocurrency community.