Court documents filed on May 3 reveal that FTX is attempting to claw back over $3.88 billion in the form of repaid loans, withdrawn liquidity, and collateral from fellow bankrupt platform Genesis. The documents claim that Genesis was one of the main culprits enabling FTX’s rash behavior.
Genesis’ Role in FTX’s Fraud
FTX’s lawyers claim that Genesis was instrumental to FTX’s fraudulent business model. Genesis Global Capital had outstanding loans of over $8 billion to FTX’s debtor, Alameda Research Ltd. Unlike other FTX creditors and customers, Genesis was largely repaid. FTX’s avoidance claims against Genesis relating to certain repayments represent significant actions in the FTX Chapter 11 cases.
Despite the bankruptcy case’s purpose is to make creditors whole again, FTX is attempting to claw back $3.88 billion from Genesis, including $2.1 billion in loan repayments and collateral pledge and $1.8 billion in FTX exchange withdrawals.
The Implications of the Clawback Attempt
The clawback attempt creates a legal precedent, even if it is denied, allowing other crypto platforms in similar situations to make identical attempts now that the Rubicon has been crossed.