Former Clinton Aide’s Investment Firm Faces $700 Million Crypto Lawsuit from FTX

News | June 23, 2023 By:

FTX, a crypto exchange that went bankrupt in November 2022, is suing Michael Kives, a former aide to Hilary Clinton, and his investment firm K5 Global. FTX alleges that Kives and K5 misappropriated $700 million of FTX’s funds for their own benefit, without providing any returns to FTX or its customers.

The lawsuit, filed in Wilmington, Delaware bankruptcy court, claims that FTX founder Sam Bankman-Fried (SBF) was a “profligate patron” who fell under the spell of Kives and K5, who boasted of their connections to Hollywood stars and Washington insiders. He turned a blind eye to the red flags raised by his employees and poured money into K5’s ventures that were either overhyped or doomed to fail.

One example of a poor investment was buying a minority stake in Kendall Jenner’s 818 Tequila brand for $214 million, when the brand had total assets of only $2.94 million, according to its SEC filings.

The suit is asking the court to order the return of the funds that were transferred from Alameda Research, a crypto trading firm affiliated with FTX, to SGN Albany Capital, a shell company controlled by Kives and Baum. The suit is also asking for the return of the funds that were transferred from Kives, Baum, and SGN Albany Capital to Mount Olympus Capital, another shell company that invested in K5’s projects.

The suit argues that these transfers were not fair because they did not receive anything of equal value in exchange for the money they sent. The suit also argues that these transfers can be undone by bankruptcy law or other laws that allow the court to reverse transactions that are fraudulent or harmful to creditors.

K5 denies the allegations and states that it thought Bankman-Fried was legitimate.

“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,” spokeswoman Elizabeth Ashford said in an email to Reuters.