FTX sues ex-Clinton aide’s investment firm for US$700 million
BANKRUPT crypto exchange FTX on Thursday (Jun 22) sued a former aide to Hilary Clinton and the former aide’s investment firm, seeking to claw back US$700 million in investments allegedly made with misappropriated FTX funds.
FTX said its founder Sam Bankman-Fried (SMF) was a “profligate patron” who showered Michael Kives, his firm K5 Global, and K5 co-founder Bryan Baum with cash as part of an ongoing scheme to fraudulently use company assets for personal gain, according to a complaint filed in Wilmington, Delaware, bankruptcy court.
Bankman-Fried authorised the transfer of US$700 million to K5 entities in 2022, and he leaned on K5’s celebrity and business connections in his effort to obtain rescue financing in the days before FTX went bankrupt in November 2022, according to the lawsuit.
Bankman-Fried described Kives, who served as an aide to Clinton when she was a Democratic US senator from New York, and who worked as a Hollywood agent for clients including actor and former Republican California governor Arnold Schwarzenegger and singer Katy Perry, as “probably, the most connected person I’ve ever met”, and “a one-stop shop” for political relationships and celebrity partnerships, according to the complaint.
Bankman-Fried brushed off FTX employees’ concerns that K5 was “trying to nickel and dime” or “scam” FTX, continuing to make investments in a quest to burnish his own political and social influence, according to the complaint.
Bankman-Fried authorised investments in K5 projects that enriched Kives and Baum with no payoff for FTX or its customers, who were footing the bill, FTX alleged.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
In one poor investment, according to the complaint, a Bankman-Fried-controlled shell company used US$214 million in funds from FTX to buy a minority stake in Kendall Jenner’s 818 Tequila brand, at a time when the tequila company’s assets were valued at just US$2.94 million in its filings with the US Securities and Exchange Commission.
K5 said that the lawsuit was without merit.
“K5 was under the impression – like many others – that SBF was completely legitimate, and that they were entering into a fair, long-term, and mutually beneficial business relationship,” spokesperson Elizabeth Ashford said in an email, referring to Bankman-Fried by his initials.
Kives did not immediately respond to a request for comment. A spokesperson for Bankman-Fried declined to comment.
Bankman-Fried has pleaded not guilty to charges alleging that he defrauded FTX customers by using their funds to prop up his own risky investments.
Since filing for bankruptcy, FTX’s new leadership has recovered more than US$7 billion in assets that can be used to repay customers whose funds were frozen when the crypto exchange collapsed.
FTX has also filed lawsuits over its pre-bankruptcy investment in the stock platform Embed and its payments to Genesis Global Capital, the bankrupt lending arm of crypto firm Genesis. FTX on Wednesday announced a settlement with the Metropolitan Museum of Art, in which the museum agreed to return US$550 million in donations that it received from FTX companies in 2022. REUTERS
Share with us your feedback on BT's products and services
