FTX Seeks to Claw $700M from Bankman Fried’s Friends and Affiliated Funds
FTX has filed a lawsuit in the United States Bankruptcy Court for the District of Delaware against some of the investment firms it had ties to before its collapse. The suit, filed on June 22, contains 16 counts and seeks over $700 million from the defendants.
Defendants Named in the Lawsuit
The lawsuit filing names the following defendants:
- Incubator and investment company K5 Global
- Mount Olympus Capital
- SGN Albany Capital
The lawsuit also includes affiliated entities and K5 Global co-owners Michael Kives and Bryan Baum. Michael Kives is a former agent for the CAA talent agency and a former aide to Hilary Clinton. The suit noted that Sam Bankman-Fried (SBF), the then-CEO of FTX, attended a social event hosted by Kives in 2022:
“True to Kives’s reputation as a high-profile ‘super-networker,’ the attendees at the dinner party included a former Presidential candidate, top actors and musicians, reality TV stars, and multiple billionaires.”
According to the lawsuit, FTX-affiliated crypto trading firm Alameda Research transferred $700 million to Kives, Baum, and K5 Global. However, the defendants constructed the deals as coming from shell companies SGN Albany and Mount Olympus Capital.
Objectives of the Lawsuit
The lawsuit aims to:
- Recover funds transferred from Alameda Research to SGN Albany Capital
- Recover funds transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital
The suit alleges that the transfers were carried out “without receiving equivalent value” and were avoidable under U.S. bankruptcy law.
Close Personal Ties and Collaborative Strategy
Kives, Baum, and SBF developed close personal ties, with Baum even having his own bedroom in the FTX executives’ Bahamas residence, according to the lawsuit. After FTX’s collapse, the suit claims 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).”
“Lawsuit is Without Merit,” says K5
In response to the lawsuit, a spokesperson for K5 Global stated that it is “without merit.” The spokesperson further explained:
“K5 is a Venture Capital firm with over $1 billion in assets under management (apart from any funds from SBF and his affiliates) and has investments in 148 companies. In mid-2022, an affiliate of Sam Bankman-Fried and Alameda bought a third of K5’s general partnership for cash and stock, and ultimately made a $400 million investment in certain funds managed by K5. K5 was under the impression – like many others – that SBF was completely legitimate, and they were entering into a fair, long-term, and mutually beneficial business relationship. Our belief is that the lawsuit is without merit.”
Charges Against the Defendants
Nine of the counts in the lawsuit concern fund transfers. The charges against the defendants are as follows:
- Kives and Baum: Aiding and abetting breach of fiduciary duty and dishonest assistance
- SGN Albany Capital: Unjust enrichment
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