FTX Launches Legal Battle against Former Clinton Aide and His Firm
The troubled cryptocurrency exchange FTX has initiated legal action against Michael Kives, a former aide to Hillary Clinton, and K5 Global, Kives' investment firm. The lawsuit claims that Kives, along with K5 co-founder Bryan Baum, benefitted from a fraudulent scheme that used misappropriated FTX funds, totaling $700 million.
FTX Founder Accused of Misusing Company Assets for Personal Gain
FTX's founder, Sam Bankman-Fried, allegedly acted as a "profligate patron," freely dispensing cash to Kives, Baum, and K5 Global. The complaint, filed in Wilmington, Delaware's bankruptcy court, accuses Bankman-Fried of employing FTX's assets for personal benefits. It claims that he approved the transfer of $700 million to K5 entities in 2022 and exploited K5's influential network to secure emergency funding just before FTX's bankruptcy in November 2022.
Kives' Connections Exploited in FTX's Rescue Bid
The lawsuit states that Bankman-Fried admired Kives for his influential connections in politics and the entertainment industry, once labeling him "probably, the most connected person I've ever met." Kives, who served as an aide to Clinton during her tenure as a Democratic U.S. senator from New York, has a star-studded clientele including former Republican California governor Arnold Schwarzenegger and pop star Katy Perry.
Bankman-Fried Dismisses Employee Concerns, Continues Investments
Despite the concerns raised by FTX employees about K5's potential scams, Bankman-Fried reportedly continued to invest in K5 projects. The complaint alleges that these investments served to boost his own political and social influence, benefitting Kives and Baum while offering no return to FTX or its customers who ultimately footed the bill.
FTX's Failed Investments and K5's Response
Among the ill-judged investments, the complaint highlights the purchase of a minority stake in Kendall Jenner's 818 Tequila brand by a Bankman-Fried-controlled shell company using $214 million in FTX funds. This occurred when the tequila company's assets were valued at just $2.94 million, according to U.S. Securities and Exchange Commission filings. In response, K5 dismissed the lawsuit as baseless and claimed they believed they were entering into a fair business relationship with Bankman-Fried.
FTX's Ongoing Efforts to Recover Assets
Despite pleading not guilty to allegations of defrauding FTX customers, Bankman-Fried has not made any public comments. Meanwhile, the new leadership at FTX has managed to recoup more than $7 billion in assets since filing for bankruptcy. These assets can be utilized to repay customers whose funds were locked when the exchange went under. FTX has also initiated legal action concerning its pre-bankruptcy investment in the stock platform Embed and payments to Genesis Global Capital, a bankrupt crypto firm. Recently, the company settled with the Metropolitan Museum of Art, which agreed to return $550,000 in donations it received from FTX in 2022.
