Alameda Research, the hedge fund arm of the bankrupt FTX empire, is seeking the return of $700 million founder Sam Bankman-Fried appears to have paid for access to celebrities and politicians.
The billions promised to “super networkers” Michael Kives and Bryan Baum show Bankman-Fried’s disregard for formalities in spending money from companies he treated as a “slush fund,” lawyers for FTX’s new management said in the Thursday court filing.
Kives – a former aide to both Bill and Hillary Clinton – and Baum “acted with dishonest minds” by accepting money, which personally benefited Bankman-Fried without providing Alameda with any equivalent payoff, the allegations read.
“Bankman-Fried treated the legal entities that he controlled as a slush fund operated with a near-total disregard for corporate formalities,” the filing by FTX added, echoing previous criticisms of poor management at the exchange, which filed for bankruptcy in November.
Bankman-Fried appeared starstruck by a February 2022 party at Kives’ house where fellow guests included a former Presidential candidate, actors, reality TV stars, musicians and multiple billionaires. Within weeks, Bankman-Fried had signed a document promising to invest billions in Kives’ and Baum’s companies, with little details on what FTX would gain in return, the filing said.
“The Term Sheet was little more than a cursory list of investment ideas” on which “no meaningful due diligence was conducted,” the filing said, citing an internal note in which Bankman-Fried said the company could “consider endorsements with their friends … work with them on Democratic politics … invest in them or some stuff, idk [I don’t know].”
Bankman-Fried also failed to clarify whether Baum was an employee of FTX or a third party, saying in an internal document that “it’s sorta complicated and liminal and unclear. Bryan lives in the uncanny valley.”
Transfers of $700 million made from Bankman-Fried’s companies to Kives’ and Baum’s had the badges of fraud under bankruptcy law, being concealed, having inflated value, and being made when FTX was about to become insolvent, the filing said.
In an emailed statement sent to CoinDesk, Elizabeth Ashford, a spokesperson for K5 Global, the company founded by Kives and Baum, said that K5 "was under the impression – like many others – that [Bankman-Fried] was completely legitimate, and that they were entering into a fair, long-term, and mutually beneficial business relationship. Our belief is that the lawsuit is without merit.”
Bankman-Fried and Alameda's affiliates had bought a third of K5's general partnership for cash and stock in 2022, ultimately making a $400 million investment in funds the company managed, Ashford said, adding that the venture capital firm had over $1 billion in assets under management aside from Bankman-Fried's interests, with investments in 148 companies.
Amitoj Singh contributed reporting.
UPDATE (June 23, 08:56 UTC): adds K5 statement.
UPDATE (June 23, 15:16 UTC): adds fuller K5 statement to CoinDesk.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.