Chapter 11 crypto exchange sues Bitcoin mining giant for $1.15 billion fraud

The FTX Recovery Trust has sued the Bitcoin miner Genesis Digital Assets to recover $1.15 billion that it claims the bankrupt crypto exchange's co-founder, Sam Bankman-Fried "SBF," had fraudulently transferred, Bloomberg Law reported on Sep. 23.

SBF commingled and misappropriated assets from the FTX business — mostly from customer deposits at the FTX.com crypto exchange — and transferred those funds to Genesis Digital, its affiliates, and its co-founders Rashit Makhat and Marco Krohn, the FTX trust has claimed.

The trust filed the complaint in the U.S. Bankruptcy Court for the District of Delaware on Sep. 22.

Genesis Digital's political connections in Kazakhstan

When China banned crypto mining in 2021, the mining community moved to Kazakhstan. Though it put pressure on its electric grid, a Bitcoin mining firm based in the country called Genesis Digital benefitted from inexpensive energy due to its political connections to the then-president Nursultan Nazarbayev, the trust's complaint alleged.

Related: What is Bitcoin mining? Explained

But the introduction of a new crypto mining tax, power rationing, and unrest over energy prices led to Nazarbayev's resignation which hurt Genesis Digital. The Bitcoin mining firm was forced to raise funds to expand in the U.S. and that's when SBF used funds from his personal hedge fund, Alameda Research LLC, to invest in Genesis Digital at “outrageously inflated prices” between August 2021 and April 2022, the complaint said.Former FTX CEO Sam Bankman-Fried arrives for a bail hearing at Manhattan Federal Court on August 11, 2023 in New York City.

Alameda Research didn't receive a reasonably equivalent value for its $1.15 billion investment, the FTX Trust made the claim.

It further alleged that there were several red flags at Genesis Digital, like no interest from other investors, unaudited and unsigned financial records, and allegations of money laundering and tax evasion, but SBF chose to ignore them.

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One of SBF's 'most reckless' investments

After the investment, Genesis Digital’s founders cashed out of a failing company and SBF got richer, the complaint alleged. Makhat and Krohn sold personal shares worth $550.9 million directly to Alameda, the complaint added.

Related: Explained: Types of Bitcoin mining

Genesis Digital “stands as one of Bankman-Fried’s most reckless investments with commingled and misappropriated funds,” the FTX Trust's complaint remarked.

Story continues

The FTX crypto exchange filed for Chapter 11 bankruptcy in November 2022 after a fraudulent transfer of customer funds was discovered. The exchange's founder, SBF, was convicted of seven counts of fraud, conspiracy, and money laundering. The court sentenced him to 25 years in prison and asked him to forfeit $11.02 billion.

This story was originally reported by TheStreet on Sep 23, 2025, where it first appeared in the Bankruptcy News & Analysis section. Add TheStreet as a Preferred Source by clicking here.

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