FTX is trying to recover $700 million that was allegedly spent after a networking party

FTX is trying to recover $700 million that was allegedly spent after a networking party

In order to recover as many assets as possible and possibly even restart FTX, the new leadership of the insolvent exchange has filed recovery requests from former business partners and donation recipients.

Reclaim requests have also been filed against former executives, including SBF itself, although the amounts that may be recovered from executives pale in comparison to the amounts claimed by other platforms such as Genesis.

Wrong investments

Yesterday, FTX's legal team filed a lawsuit against several hedge funds, including SGN Albany Capital, K5 Global, and Mount Olympus Capital. The document also names companies affiliated with these hedge funds as well as K5 executives Bryan Baum and Michael Kives.

According to the lawsuit, Sam Bankman-Fried went to one of the many networking events hosted by the two top executives. Following this incident, SBF invested approximately $700 million in funds managed by the defendants.

While this may seem like a superficial amount given the amounts that FTX Group regularly invested in various ventures, these reportedly had no real significance.

“Bankman-Fried, Kives and Baum signed a simple term sheet stating that “Sam Bankman-Fried or an affiliate” would personally give each of Kives and Baum $125 million and invest billions of dollars in K5 Global and affiliates […]. The term sheet was little more than a cursory list of investment ideas and repeatedly stated that the actual "mechanics" of these very large investments would be worked out later "in the long-form documents." Although the parties did not agree on final terms, the funds were transferred the day after the signing.”

Aside from the unjust enrichment charges brought against the hedge funds themselves, Kives and Baum were also accused of aiding and abetting breaches of fiduciary duty in “one of the largest financial fraud cases in history.”

FTX wants to reclaim $800 million from K5 Global, Olympus Capital, SGN Albany and others.

The defendants are further accused of aiding and abetting the SBF, unfair aiding and abetting and unjust enrichment. pic.twitter.com/IPcDEtuFxL

— FTX 2.0 Coalition (@AFTXcreditor) June 22, 2023

Keep new friends close

The lawsuit also states that shortly after the meeting, an internal FTX communication was circulated in which SBF “raved” about the connections available through the pair. SBF seemed eager to “work with them on Democratic politics” and “maybe invest in them or something, I don’t know.”

The relationship lasted a while, and huge amounts were billed and invested between the firms - many of which seemed inflated or incorrect even to FTX's notoriously lax accountants.

Furthermore, when it became clear that FTX was on the verge of collapse, “Kives and Baum worked behind the scenes with Bankman-Fried on a strategy to find someone to save FTX Group (and protect their golden goose).”

According to the document, the two had reached out to their network of high-flyers to find possible rescues for SBF. An unnamed investor has reportedly agreed to spend more than $9 billion to rescue FTX. However, the deal fell through when the unnamed investor took a look at the bankrupt crypto empires' balance sheets.

If the lawsuit is successful, FTX could potentially recover up to $700 million. However, the actual amount invested in Kives and Baum's networks is reportedly much higher.

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