NEW YORK, June 22 (Reuters) – (This June 22 story has been resubmitted to correct the spelling of ‘Hillary’ in paragraph 1)
Bankrupt crypto exchange FTX sued a former Hillary Clinton aide and the former aide’s investment firm on Thursday, seeking to recover $700 million in investments allegedly made with embezzled FTX funds.
FTX said founder Sam Bankman-Fried was a “dissolute patron” who showered Michael Kives, his firm K5 Global and K5 co-founder Bryan Baum with cash as part of an ongoing scheme to fraudulently use company assets for personal gain , FTX said. filed a complaint in the bankruptcy court of Wilmington, Delaware.
Bankman-Fried authorized the transfer of $700 million to K5 entities in 2022, and he leaned on K5’s celebrities and business connections in his bid to secure bailout financing in the days before FTX filed for bankruptcy in November 2022, according to the court case.
Bankman-Fried described Kives, who served as Clinton’s aide when she was a Democratic U.S. Senator from New York, and who worked as a Hollywood agent for actor and former Republican Governor of California Arnold Schwarzenegger and singer Katy Perry, among others, as “probably , the most connected person I’ve ever met,” and “a one-stop shop” for celebrity political relationships and partnerships, the indictment said.
Bankman-Fried brushed aside concerns among FTX employees that K5 was “trying to screw up” or “swindle” FTX, and continued to invest in a quest to polish its own political and social clout, the complaint said.
Bankman-Fried authorized investments in K5 projects that enriched Kives and Baum to no avail for FTX or its customers, who footed the bill, FTX claimed.
In one bad investment, according to the complaint, a Bankman-Fried controlled shell company used $214 million in funds from FTX to buy a minority stake in Kendall Jenner’s 818 Tequila brand, at a time when the tequila’s assets company were valued at just $2.94 million in its filings with the U.S. Securities and Exchange Commission.
K5 said the lawsuit was baseless.
“K5 was under the impression — like many others — that SBF was perfectly legitimate and that they were entering into a fair, long-term and mutually beneficial business relationship,” spokeswoman Elizabeth Ashford said in an email, referring to Bankman-Fried by his initials.
Kives did not immediately respond to a request for comment. A spokesperson for Bankman-Fried declined to comment.
Bankman-Fried has pleaded not guilty to allegations that he defrauded FTX clients by using their money to support his own high-risk investments.
Since filing for bankruptcy, FTX’s new leadership has recovered more than $7 billion in assets that can be used to repay customers whose funds were frozen when the crypto exchange collapsed.
FTX has also filed lawsuits over its pre-bankruptcy investment in the equity platform Embed and its payments to
Genesis Global Capital, the bankrupt lender of crypto company Genesis. FTX announced a settlement with the Metropolitan Museum of Art on Wednesday in which the museum agreed to repay $550 million in donations it received from FTX companies in 2022.
Reporting by Dietrich Knauth in New York Edited by Alexia Garamfalvi and Matthew Lewis