FTX Recovery Trust Sues Genesis Digital for $1.15 Billion Over Misused Customer Funds

Highlights:

• FTX Recovery Trust has sued Genesis Digital over alleged misuse of customer funds.
• Bankman-Fried directed Alameda Research to buy Genesis Digital shares at inflated prices despite warning signs.
• The trust is still reimbursing customers with $1.6 billion expected in September.

The FTX Recovery Trust filed a major lawsuit seeking $1.15 billion from Genesis Digital Assets and its co-founders, Rashit Makhat and Marco Krohn. The complaint appeared in the US Bankruptcy Court for the District of Delaware on September 22. The trust claims these funds were misappropriated from FTX customer deposits during 2021 and 2022. The lawsuit identifies Sam Bankman-Fried as the orchestrator behind these investments through his company, Alameda Research.

1/ FTX Recovery Trust has filed a $1.15B lawsuit against Genesis Digital, alleging fraudulent transfers of funds from the bankrupt exchange. Former CEO Sam Bankman-Fried is accused of orchestrating overvalued Genesis share purchases using client and creditor money, personally…

— Cryptowave (@cryptsnews) September 24, 2025

Court documents indicate that over half of the $1.15 billion went directly to Genesis Digital’s co-founders. Alameda purchased 154 preferred shares for more than $500 million. An additional $550.9 million went straight to Makhat and Krohn. The filing describes these transactions as part of Bankman-Fried’s plan to benefit personally. As the 90% owner of Alameda, he stood to capture nearly all potential gains while shifting losses to FTX customers and creditors.

The lawsuit is one of the wider legal reactions to the collapse of FTX. Customer finances were redirected to Alameda as debts with FTX continued to rise. The Recovery Trust contends that Bankman-Fried had turned a blind eye to the red flags and acted based on false information. According to court filings, internal communications mentioned the valuations as wild and off-market.

FTX Recovery Trust Sues Genesis Digital Over Inflated Investments

The complaint details several warning signs that Bankman-Fried allegedly ignored. Genesis Digital was based in Kazakhstan during an ongoing energy crisis. The company allegedly submitted financial documents that “bore no relation to reality.” Unbuilt data centers in the US also raised doubts about the miner’s actual capacity. Despite these issues, Bankman-Fried instructed Alameda to proceed with the purchases.

The lawsuit points out that the transfers were in the best interest of the personal gain of Bankman-Fried with an exposure of the FTX customers to losses. Allegedly, he intended to capture the upside of Genesis Digital’s inflated valuation while externalizing the risks. The complaint accuses Bankman-Fried of actual and constructive fraud under federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act. Legal filings describe how billions in customer funds were already diverted before these investments.

Internal communications show that executives were aware of irregular valuations yet continued with the transactions. The lawsuit highlights that Bankman-Fried disregarded potential financial dangers. In taking the investments in Genesis Digital, he purportedly increased the losses of the FTX creditors. The complaint highlights that the location of the company, fabricated documents, and unproven projects should have been an issue. According to the legal experts, these considerations will be the key in demonstrating the claims of the trust in court.

Customer Reimbursements Continue Amid Broader Recovery Efforts

The bankruptcy process of FTX has already paid out customers and creditors high amounts of money. The initial reimbursements began in February with a payment of $1.2 billion. The trust also paid out an extra $5 billion to claimants in May 2025. The Recovery Trust will issue an additional $1.6 billion on September 30.

FTX to distribute $1.6B in third creditor payout#FTX will release an additional $1.6 billion to creditors as part of its bankruptcy proceedings, with payments scheduled to begin on September 30. This marks the exchange’s third distribution under its Chapter 11 reorganization…

— 970.sui 🦭 (@izzetcakmak35) September 21, 2025

The settlements in the past indicate constant endeavors to reclaim assets. Genesis Global Trading, with no connection to Genesis Digital Assets, settled in 2023 and paid FTX $175 million. These measures are part of a bigger scheme to compensate impacted users. The current lawsuit against Genesis Digital and its co-founders is based on earlier recoveries. It further indicates that the trust is still working through any channel to recover stolen money effectively.