According to a Reuters report, Bankrupt cryptocurrency exchange FTX has filed a lawsuit against K5 Global, an investment firm co-founded by Michael Kives, a former aide to Hillary Clinton.
The lawsuit seeks to recover $700 million in investments allegedly made with misappropriated FTX funds.
FTX Goes For The Jugular
FTX founder Sam Bankman-Fried is accused of using company assets for personal gain by authorizing the transfer of funds to K5 entities in 2022.
According to the report, the lawsuit alleges that Bankman-Fried leaned on Kives’ celebrity and business connections to obtain rescue financing in the days before the exchange went bankrupt in November 2022.
Furthermore, the complaint filed in the Wilmington, Delaware, bankruptcy court claims that Bankman-Fried ignored FTX employees’ concerns about K5’s investment schemes and continued to invest in a quest to burnish his own political and social influence.
FTX alleges that Bankman-Fried authorized investments in K5 projects that “enriched” Kives and co-founder Bryan Baum with no payoff for the exchange or its customers, who were footing the bill.
Additionally, according to the complaint filed in Delaware bankruptcy court, 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.
However, K5 has denied the allegations, claiming they were under the impression that their business relationship with the defunct exchange was fair, long-term, and mutually beneficial. K5 has refuted the allegations and said the lawsuit is without merit.
Reuters report alleges that one of the investments made by the Bankman-Fried-controlled shell company was a minority stake in Kendall Jenner’s 818 Tequila brand, using $214 million in funds from the company.
At the time, the tequila company’s assets were valued at just $2.94 million in its filings with the US Securities and Exchange Commission.
FTX’s new leadership has recovered more than $7 billion in assets since filing for bankruptcy, which can be used to repay customers whose funds were frozen when the cryptocurrency exchange collapsed.
The firm has also filed lawsuits over its pre-bankruptcy investment in the stock platform Embed and its payments to Genesis Global Capital, the bankrupt lending arm of crypto firm Genesis. The cryptocurrency exchange recently settled with the Metropolitan Museum of Art, which agreed to return $550 million in donations it received from FTX companies in 2022.
Overall, the lawsuit against K5 Global adds another layer of complexity to FTX’s ongoing legal battles. The outcome of the lawsuit will determine whether FTX can recover the $700 million in investments allegedly made with misappropriated funds.
Featured image from Unsplash, chart from TradingView.com