K5 Global Sued to Court by FTX, May Pay $700 Million
Coinspeaker
K5 Global Sued to Court by FTX, May Pay $700 Million
Bankrupt FTX exchange has filed a lawsuit against K5 Global – an investment firm owned by a former aide to Hillary Clinton. According to a Reuters report, the suit was filed at the United States Bankruptcy Court for the District of Delaware. It contains 16 counts against the defendants and seeks to recover about $700 million from them.
According to the filing, the defendants include K5 Global, Mount Olympus Capital, SGN Albany Capital, their affiliates, and K5 Global co-founders Michael Kives and Bryan Baum. The filing also revealed how the then-CEO of FTX Sam Bankman-Fried (SBF) misappropriated company funds for personal gains.
FTX Says Deal with K5 Global Was ‘Avoidable’
FTX alleges that its investment arm Alameda Research transferred no less than $700 million to Kives, Baum, and K5 Global. The complaint also added that the transfers were done as though they had any business with shell companies SGN Albany and Mount Olympus Capital.
However, the suit points out that the transfers were carried out “without receiving equivalent value” thus, making them avoidable. And as it is, the US bankruptcy law allows an avoidable transaction to be reversed under the Bankruptcy Code.
Nine out of the 16 counts in the suit were about fund transfers. But Kives and Buam got personal charges for aiding and abetting breach of fiduciary duty and dishonest assistance. SGN Albany Capital, on the other hand, was charged with unjust enrichment.
Lawsuit Lacks Merit, K5 Responds
K5 Global has dispelled the allegations and has responded to the lawsuit. According to a company spokesperson, the entire suit lacks merit and should not even be made to look important.
The spokesperson cites how K5 is a Venture Capital firm with over $1 billion in assets under management (AUM). That is excluding any funds linked to SBF or affiliates. K5 also has investments in 148 companies, he said.
However, he also acknowledged that FTX’s Alameda truly bought a third of K5’s general partnership for cash and stock in mid-2022. That, and that SBF and his company eventually made a $400 million investment in certain funds managed by K5. Nonetheless, the spokesperson said that “K5 was under the impression – like many others – that SBF was completely legitimate and they were entering into a fair, long-term, and mutually beneficial business relationship”.