Amid continuing fallout from the implosion of FTX last November, Alameda Research has filed a lawsuit against K5 Global and a co-founder. The purpose of the suit? To regain $700 million that former FTX head Sam Bankman-Fried donated, when seeking to build relationships in the days before FTX fell apart.
Plaintiffs say Bankman-Fried authorized a transfer of $700 million hoping to consolidate his ties with Michael Kives, a former Hillary Clinton aide. And with Kives’s asset manager, K5 Global. However, in an email exchange with BeInCrypto, a K5 representative described the investment as aboveboard.
Are Alameda Research’s Claims Wrong?
According to the lawsuit, Sam Bankman-Fried wanted to be on Kives’s good side. Tellingly, the FTX founder called Kives “the most connected person I’ve ever met,” as reported in a Reuters story.
The attacks on Bankman-Fried have sought to portray him as a gregarious crypto entrepreneur. Hence as one who wanted to make fast friends by throwing money around. In the view of the plaintiffs, the recipients of the $700 million were more his friends than business associates.
But Elizabeth Ashford, a K5 Global spokesperson, rebutted the claims in a statement sent to BeInCrypto, Reuters, and other news organizations.
“Our belief is that the lawsuit is without merit,” Ashford wrote in the email to BeInCrypto.
Moreover, in her email, Ashford described K5 as an established asset manager. And as one that had every right to do legitimate business with Bankman-Fried during the period in question. Ashford wrote:
“K5 is a venture capital firm with over $1 billion in assets under management (apart from any funds from SBF and his affiliates and has investments in 148 companies.”
In the middle of 2022, Ashford explained, an affiliate of SBF and Alameda made a deal to purchase a third of K5’s general partnership. The deal involved both cash and stock. And the affiliate ended up making a $500 million investment in K5-managed funds.
From K5’s standpoint, there was no reason at the time to view the investment as other than legal and appropriate.
For its part, K5’s LinkedIn page describes it as a firm with “2-10” employees.
FTX Complications
The insolvency of FTX is a nettlesome and protracted legal process. This is far from the first legal action that Alameda has taken. Its efforts to mitigate the disaster of FTX’s failure are many and varied.
In March, Alameda sued Grayscale Investments over the valuation of FTX debtors’ shares in its Ethereum and Bitcoin trusts.
By stopping debtors from making redemptions, the suit claimed, Grayscale diluted the value of the shares by 90%.
John Ray III took over as CEO of FTX Trading with the aim of guiding the exchange through its restructuring. Ray charged at the time that Grayscale’s “self-dealing” had diminished the value of FTX debtors’ shares.
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