FTX sues ex-Clinton aide's investment firm for $700 million
NEW YORK, June 22 (Reuters) - (This June 22 story has been refiled to correct spelling of 'Hillary' in paragraph 1)
Bankrupt crypto exchange FTX on Thursday sued a former aide to Hillary Clinton and the former aide's investment firm, seeking to claw back $700 million in investments allegedly made with misappropriated FTX funds.
FTX said its founder Sam Bankman-Fried 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 authorized the transfer of $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 U.S. 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 authorized investments in K5 projects that enriched Kives and Baum with no payoff for FTX or its customers, who were footing the bill, FTX alleged.
In one poor investment, according to the complaint, a Bankman-Fried-controlled shell company used $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 $2.94 million in its filings with the U.S. 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,” spokeswoman Elizabeth Ashford said in an email, referring to Bankman-Fried by his initials.
Kives did not immediately respond to a request for comment. A spokesman 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 $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 $550 million in donations that it received from FTX companies in 2022.
Reporting by Dietrich Knauth in New York Editing by Alexia Garamfalvi and Matthew Lewis
Our Standards: The Thomson Reuters Trust Principles.
Source: Reuters
