FTX sues investment firm K5 Global for $700 million

According to Bloomberg, the two founders of investment firm K5 Global, Michael Kives and Bryan Baum, are accused of profiting by being close to former FTX CEO Sam Bankman-Fried.

Sam Bankman-Fried described Michael Kives as the most well-connected person he had ever met and saw Kives as someone who would help him build political relationships and celebrity partnerships.

FTX said the former CEO of FTX was a “profligate patron.” Bankman-Fried signed a term sheet to “pour” billions of dollars into K5 Global and paid Kives and Baum $125 million each. FTX employees were concerned that K5 was trying to make money or defraud FTX, but Bankman-Fried continued to invest to increase his political and social influence.

In 2022, the cryptocurrency exchange FTX and the investment fund Alameda Research, founded by Bankman-Fried, transferred $700 million to affiliates of K5 Global, Kives, and Baum. Before going bankrupt in November 2022, FTX tried to rely on K5’s celebrity and business connections to seek financial support.

FTX alleges Bankman-Fried's investments enriched Kives and Baum

According to FTX’s complaint, a shell company controlled by Bankman-Fried used $214 million from FTX to buy a minority stake in model Kendall Jenner’s 818 Tequila brand, at a time when the tequila company’s assets were valued at just $2.94 million.

Bankman-Fried has denied allegations that he defrauded FTX customers by using their money to support his own risky investments.

Since filing for bankruptcy, FTX’s new management has recovered more than $7 billion in assets, which can be used to repay customers whose funds were frozen when the FTX exchange collapsed.

FTX has also filed a lawsuit against the Embed Securities platform and its payments to Genesis Global Capital, the bankrupt lending arm of the crypto company Genesis. FTX also announced a settlement with the Metropolitan Museum of Art (USA), in which the museum agreed to return $550,000 in donations it received from the company in 2022.

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