Blockworks

The FTX Recovery Trust has filed a lawsuit against Bitcoin mining company Genesis Digital Assets Ltd. and its co-founders, seeking to claw back $1.15 billion that it alleges was misappropriated from customer deposits.



The complaint, lodged on Sept 22 in the US Bankruptcy Court for the District of Delaware, was assigned as Adversary Case No. 25-52358 under Judge Karen B. Owens, according to the official case docket.



According to the filing, Alameda transferred more than $1.15 billion, with over half routed directly to co-founders Rashit Makhat and Marco Krohn. The trust argues that the money originated from FTX.com customer deposits and was moved through Alameda’s credit lines and bank accounts, including the now-notorious North Dimension subsidiary.



Internal communications cited in the lawsuit describe the valuations paid as “insane and off-market,” while contemporaneous risks such as energy shortages in Kazakhstan and unbuilt US data centers raised questions about the miner’s true prospects.



The trust is pursuing claims under both federal bankruptcy law and Delaware’s Uniform Fraudulent Transfer Act, alleging actual and constructive fraud.&nbsp;



The lawsuit adds to the complex web of litigation following FTX’s downfall, including a $175 million settlement earlier this year with Genesis Global, the lending arm of Digital Currency Group.



This is a developing story.



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This article was generated with the assistance of AI and reviewed by editor&nbsp;<a href="mailto:jeffrey@blockworks.co" target="_blank" rel="noreferrer noopener">Jeffrey Albus</a>&nbsp;before publication.



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Alameda Research

FTX Trust sues Genesis Digital over $1.15B transfers

Katherine Ross

Illusory Systems, the firm behind Nomad Bridge, moved this week to dismiss a class action lawsuit against the company centered on a nearly $190 million hack that occurred last year.



The original complaint listed Illusory, Archetype, Ethereal Ventures, Consensys, Coinbase, Alchemy, Circle and Ozone as defendants.



The group filed the motion to dismiss, claiming the original complaint failed to properly state a claim. 



The motion to dismiss said the plaintiffs were not looking to “hold the hackers liable for their wrongdoing and the harm they caused,” but instead were angling to “blame Illusory and the Keyholders for purported shortcomings in certain security features that allegedly allowed the assets to be stolen, and seek to hold Illusory and the Keyholders liable for their losses.”



The suit accused the defendants of making “knowingly false statements about the Nomad Bridge’s security” and violating laws prohibiting wire fraud and operating an unlicensed money-transmitting business, two offenses falling under the Racketeering Influenced and Corrupt Organizations Act.&nbsp;



The defendants said the plaintiffs&#8217; attorneys “do not state an underlying substantive RICO claim” in the proceedings.&nbsp;



The original suit, filed in February, asked for funds that went missing in the hack to be returned to customers, and it also sought monetary damages. Some <a href="https://blockworks.co/news/nomad-recovers-nearly-20m-of-stolen-190m">$20 million of the nearly $190 million lost in the hack was later recovered</a>.



“Given the Investor Defendants’ exceedingly attenuated relationship to the alleged flaws of the Nomad Bridge, there is no set of facts that Plaintiffs can plausibly allege to overcome the numerous deficiencies in the [first amended complaint,” the motion said.



A court has yet to grant or deny the motion to dismiss.



The original class action suit from earlier this year claimed that the company behind Nomad’s bridge “had promised users that it employed state-of-the-art cryptography to protect user assets.”



Illusory made an “illusory promise,” the plaintiffs alleged.&nbsp;



When the $186 million hack took place in August 2022, plaintiff Mannu Singh claimed to have lost $170,000 of his assets.



Nomad, prior to the hack, had marketed itself as a <a href="https://blockworks.co/news/nomad-token-bridge-raided-for-190m-in-frenzied-free-for-all">“security-first” platform</a>, which could send ERC-20 tokens between compatible blockchains.



Updated July 20, 2023 at 12:09 pm ET: Added all defendants listed in the complaint.



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