Court documents filed on May 3 reveal that FTX is trying to recover funds through repaid loans, withdrawn liquidity, and collateral from Genesis, a fellow bankrupt platform. The total amount of money at stake is over $3.88 billion across all entities affiliated with Genesis.
Accusations Against Genesis
According to documents filed by FTX’s legal team, Genesis was one of the main contributors to allowing FTX Group’s unacceptable behavior to go unchecked. The legal team attempts to legitimize their motion by claiming that Genesis was largely repaid in contrast to other FTX creditors. Genesis was a significant contributor to FTX’s fraudulent business model and provided over $8 billion in outstanding loans to FTX Alameda Research Ltd in 2021.
“The FTX Debtors’ Avoidance Claims against Genesis relating to certain of those repayments represent significant avoidance actions in the FTX Chapter 11 Cases.”
Despite the whole point of a bankruptcy case being to make creditors whole again, FTX seeks to recover $.188 billion of loans that were repaid to Genesis by FTX Group. A further $273 million represents the pledge of collateral by Alameda to Genesis that was apparently used for the purpose of collateral.
Withdrawn Assets at Stake
The most significant part of the clawback attempt is the request to return funds that were already withdrawn by Genesis. FTX Group seeks over $1.8 billion in Genesis liquidity that was withdrawn from FTX platforms. $1.6 billion in assets belonged to Genesis, and $213 million belonged to GGC International, a Genesis-affiliated business classified as a non-debtor in the case.
If the motion passes, this second attempt sets up a legal precedent for other crypto platforms in similar situations to make the same claims.
FTX moves to claw back $3.9 billion from Genesis.
1. $2.1 billion loan repayments/collateral pledge
2. $1.8 billion FTX exchange withdrawals pic.twitter.com/1SsW8yoPck
— FTX 2.0 shareholder (in spe) (@AFTXcreditor) May 3, 2023