FTX sues ex-Clinton aide’s investment firm for $700 million

NEW YORK, June 22 (Reuters) – (This story from June 22 has been reposted 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 recover $700 million in investments allegedly made with embezzled FTX funds.

FTX said its founder Sam Bankman-Fried was a “prodigal patron” who showered Michael Kives, his company K5 Global and K5 co-founder Bryan Baum with cash as part of an ongoing scheme to Fraudulently using 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 relied on K5’s fame and business connections in his efforts to secure bailout funding in the days before FTX went bankrupt. in November 2022, according to the lawsuit.

Bankman-Fried described Kives, who served as Clinton’s aide when she was a Democratic U.S. senator from New York, and who worked as an agent in Hollywood for clients including actor and former Republican Governor of California Arnold Schwarzenegger and singer Katy Perry, as “probably the most connected person I’ve ever met” and “one-stop shop” for political connections and celebrity partnerships, according to the complaint.

Bankman-Fried brushed aside FTX employees’ concerns that K5 was “trying to sell nickel and silver” or “scamming” FTX, continuing to invest in a quest to bolster its own political and social clout, the complaint says. .

Bankman-Fried authorized investments in K5 projects that enriched Kives and Baum without any benefit to FTX or its customers, who were footing the bill, FTX alleged.

In a bad investment, the complaint says, a shell company controlled by Bankman-Fried used $214 million in FTX funds to buy a minority stake in Kendall Jenner’s 818 Tequila brand, at a time when the company’s assets of tequila were valued at just $2.94. million in its filings with the United States Securities and Exchange Commission.

K5 said the lawsuit was without merit.

“K5 felt – like many others – that SBF was entirely legitimate and that they were entering into a fair, long-term and mutually beneficial business relationship,” spokeswoman Elizabeth Ashford said in an email. mail, referring to Bankman-Fried. by his initials.

Kives did not immediately respond to a request for comment. A Bankman-Fried spokesperson declined to comment.

Bankman-Fried has pleaded not guilty to charges alleging he defrauded FTX clients by using their funds to support his own risky investments.

Since filing for bankruptcy, FTX’s new management has recovered more than $7 billion in assets that can be used to reimburse clients whose funds were frozen during the crypto exchange’s collapse.

FTX also filed lawsuits over its pre-bankruptcy investment in the Embed exchange platform 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 it received from FTX companies in 2022.

Reporting by Dietrich Knauth in New York Editing by Alexia Garamfalvi and Matthew Lewis

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