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(Kitco News) -
Bankrupt cryptocurrency exchange FTX wants $3.9 billion back from bankrupt crypto lender Genesis Global Capital (GGC), according to a May 3 court filing.
FTX lawyers are targeting $1.8 billion in loans and $273 million in pledged collateral which they claim were FTX customer funds transferred to Genesis from Alameda Research.
FTX is also seeking the return of $1.6 billion in direct withdrawals from the exchange which they say were made by Genesis, along with an additional $213 million withdrawn by GGC International, the lender’s British Virgin Island subsidiary, prior to the FTX bankruptcy filing on Nov. 11, 2022.
“Genesis was one of the main feeder funds for FTX and instrumental to its fraudulent business model,” the filing claims. “At one point in 2021, GGC had over $8 billion of outstanding loans to FTX Debtor Alameda Research Ltd. (“Alameda”). Unlike other FTX creditors and customers, Genesis was largely repaid.”
FTX lawyers are claiming that $3.9 billion of that $8 billion constitute “avoidable transfers” under the law.
“The Avoidance Actions will seek to claw back funds received by Genesis and non-debtor affiliates so that these funds can be shared with all other creditors of the FTX Debtors in the FTX Chapter 11 Cases,” they wrote. “These creditors include several million customers owed over $11 billion as of the time of filing of FTX Chapter 11 Cases.”
U.S. bankruptcy law allows for the recouping of “avoidable transfers” that occur within the 90 days immediately preceding a company’s bankruptcy.
FTX creditors were themselves the subject of another May 3 court filing, this one submitted by four of the most prominent media companies in the world, which seeks to lift the redaction order covering the list of erstwhile FTX customers, now current FTX creditors.
The filing was made by The New York Times, Bloomberg, Dow Jones, and Financial Times, who jointly filed their objection to the redaction of non-U.S. FTX customers’ information. They argue that “there was no basis in the record for either (i) extending the 90-day Redaction Period […] or (ii) finding that public access to the names of FTX’s customer-creditors would expose them to undue risk of identity theft or other unlawful injury,” they wrote.
“If being targeted by phishing emails and other fraud vectors were enough to justify sealing individuals’ names, then virtually every individual party to a bankruptcy proceeding could litigate anonymously,” they added. “Neither the First Amendment nor the Bankruptcy Code permits that outcome. And nothing in the record supports making a special exception for FTX’s individual customer creditors here.”
The four news services also argued that there is no legal basis under foreign law to redact the creditors’ names.
“The law of the United States — constitutional and statutory — guarantees the public a strong presumptive right to inspect bankruptcy filings,” they said. “That right cannot be abrogated by a party’s assertion of legal obligations under foreign law, including a party’s desire to avoid paying fines to which it might be subject under foreign law.”
FTX and the committee which represents their debtors had until 4:00 pm EDT on May 4, to submit an objection, and the hearing for the May 3 filing is scheduled for 1:00 pm EDT on May 17.
