FTX’s Alameda moves to claw back $700 million from K5 Global

By Sarah Lizee

Olympia, Wash., June 22 – FTX Trading Ltd. debtor Alameda Research Ltd. has filed a complaint against venture capital firm K5 Global Holdings LLC and co-owners Michael Kives and Bryan Baum.

As background, former FTX chief executive officer Sam Bankman-Fried met Kives, a celebrity talent agent and “super-networker,” in early 2022, Alameda said in documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of Delaware.

The debtor said that shortly after that, Bankman-Fried stated in an internal note that Kives and Baum were “something of a one-stop shop for relationships that we should utilize.”

In exchange, Kives and Baum wanted Bankman-Fried to “consider endorsements with their friends,” “us to work with them on Democratic politics,” and “maybe us to invest in them or some stuff,” Bankman-Fried said in the internal note.

In the following weeks, Bankman-Fried, Kives and Baum signed a term sheet providing that Bankman-Fried or a related entity would give each of Kives and Baum $125 million personally and would invest billions of dollars in K5 Global and affiliated entities over the next three years.

Alameda said the term sheet was little more than a cursory list of investment ideas and repeatedly stated that the actual “mechanics” of the substantial investments would be later worked out “in the long form documents.”

The day after signing the term sheet, Bankman-Fried caused Alameda and another debtor to wire $300 million to K5 Global’s bank account.

“No meaningful due diligence was conducted prior to signing the term sheet, wiring $300 million to K5 Global, or executing the later ‘long form documents,’” Alameda said in the complaint.

Alameda added that no financial analysis supported the valuations implied by the terms of the investments, which in many cases were “obviously grossly inflated.”

In May 2022, Bankman-Fried caused Alameda to transfer another $200 million to other K5 entities, and an additional $200 million in September 2022.

Alameda said Kives and Baum each personally walked away with $125 million at closing of those transactions.

The total prepetition transfers to Kives, Baum and related entities from Alameda totaled $700 million, according to the complaint.

“Bankman-Fried, Kives and Baum knew that these transactions were anything but typical arm’s-length investments and that Bankman-Fried treated the legal entities that he controlled as a slush fund operated with a near-total disregard for corporate formalities,” Alameda said.

Through the complaint, Alameda is seeking to avoid and recover the $700 million in transfers, and avoid any obligations that Alameda incurred to the defendants from March 2022 through September 2022.

Alameda is also bringing claims against Kives and Baum for aiding and abetting breach of fiduciary duty and dishonest assistance.

FTX has headquarters in the Bahamas. The company filed Chapter 11 bankruptcy on Nov. 11, 2022 under case number 22-11068.

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