CEFIREGULATION

Team restructuring claims Genesis is the mastermind behind the FTX scam, demanding Genesis to return nearly $3.9 billion

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Team restructuring claims Genesis is the mastermind behind the FTX scam, demanding Genesis to return nearly $3.9 billion

The bankruptcy team of FTX is attempting to recover the $3.9 billion loan repaid by both parties in the lending relationship before the bankruptcy of FTX, under the pretext of "providing significant assistance to FTX's fraudulent business model."

FTX Claims $3.9 Billion from Genesis

According to court documents, the bankrupt lending platform Genesis is attempting to avoid any claims made against it as part of its liquidation process. The FTX restructuring team has responded to these claims:

I. Genesis Allegedly Facilitated Fraud for FTX

Genesis, a major funding source for FTX, is accused of aiding in fraudulent business practices.

Unlike FTX's creditor users, FTX had reportedly repaid most of its debts to Genesis prior to the bankruptcy.

II. Genesis Allegedly Recouped Significant Funds from FTX During the 90-Day Preference Period

Alameda and Genesis Trading's affiliate GGC had several financial transactions with FTX before the bankruptcy:

  • Alameda repaid a $1.8 billion loan to GGC

  • Alameda pledged $273 million worth of crypto assets to GGC

  • GGC withdrew $1.6 billion in crypto assets from FTX

  • GGC International, a subsidiary of GGC, withdrew $213 million in crypto assets from FTX

III. GGC Acts as an Active Fund Institution for Alameda

GGC borrows cryptocurrencies from various lending platforms and transfers the loans to Alameda and other borrowers to generate profits through interest differentials.

In 2021, GGC provided $8 billion in loans to Alameda.

FTX and Genesis Both in Bankruptcy Reorganization Process

Both parties are undergoing bankruptcy reorganization processes, indicating that they both have preferential claims within the 90 days before the bankruptcy. While Genesis is an institutional lending platform, a more favorable court ruling for FTX could potentially benefit more retail creditor stakeholders. However, as highlighted by Bloomberg, success in priority claims during bankruptcy reorganization is not guaranteed.

Representatives from FTX and Genesis have not commented on this news.