Bankruptcy Reveals $1 Billion FTX-Tied Stake in Bitcoin Miner

FTX founder Sam Bankman-Fried leaves Manhattan federal court

Michael M. Santiago / GettyImages

Failed crypto tycoon Sam Bankman-Fried invested $1 billion into Genesis Digital Assets, a bitcoin miner in Kazakhstan, just months before the collapse of his FTX platform heralded a crypto winter that's looking more like an ice age.

Bankman-Fried made the investment, the crypto exchange's biggest, through Alameda Research, the FTX-linked hedge fund that's at the center of his firm's bankruptcy, the Wall Street Journal reported.

Key Takeaways

  • Former FTX CEO Sam Bankman-Fried’s Alameda Research invested about $1 billion in Kazakh bitcoin miner Genesis Digital Assets, bankruptcy disclosure has shown.
  • Bankman-Fried joined the board of the mining firm in October 2021, but resigned in November 2022, a day before FTX filed for bankruptcy protection.
  • The sizable investment, one of FTX's largest assets, is yet another insight into the FTX collapse, which has irked the crypto community as about 1 million FTX creditors await repayment.
  • Bankman-Fried has defended his dealings as the head of FTX on social media, saying he "didn't steal funds."

$1 Billion On Mining Firm

Alameda invested $1 billion between August 2021 and April 2022 four times: $100 million in August 2021, $550 million in January, $250 million in February, and $250 million in April 2022.

Alameda shelled out half its investment on operations, spending the rest to buy shares held by two Genesis co-founders. Bankman-Fried joined the Genesis board in October 2021 and resigned on November 10, 2022—one day before FTX filed for bankruptcy.

Genesis didn't live up to its name. Bitcoin mining profits slid thanks to falling bitcoin prices, climbing electricity prices, and a high network hash rate. U.S. financier and short-lived Trump spokesman Anthony Scaramucci’s SkyBridge Capital invested more than $60 million in Genesis and cut its stake by 59% between its June high point and September 2022, according to SkyBridge securities filings.

It didn't help that the Kazakhstan government restricted bitcoin mining, which led the company to move away from the country— and to the U.S.

SBF Defends Himself on Substack

Bankman-Fried, who is out on bail at his parents' home in California and awaiting trial on federal fraud charges, defended himself on social media this week. He wrote on the email newsletter platform Substack that he's innocent and gave his explanation of what caused FTX's collapse.

FTX and Alameda imploded due to a crypto market meltdown and inadequate hedging on Alameda's part, according to Bankman-Fried.

"I didn't steal funds, and I certainly didn't stash billions away," Bankman-Fried wrote on Substack. "Alameda lost money due to a market crash it was not adequately hedged for–as Three Arrows and others have this year. And FTX was impacted, as Voyager and others were earlier,'' he concluded.

The Bottom Line

Meanwhile, FTX's former director of engineering, Nishad Singh, engaged in a proffer session—a meeting between a criminal defendant or suspect and the government outside a court—which will offer him limited immunity. Singh hasn't been accused of wrongdoing. Earlier, former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang agreed to cooperate with prosecutors.

Article Sources
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  1. The Wall Street Journal. "Sam Bankman-Fried’s Supersized Bet: $1 Billion for a Bitcoin Miner on the Kazakh Steppe."

  2. Bloomberg. ''Alameda Bet Big on Crypto Miner Genesis Before Sector Implosion''

  3. Bloomberg. ''Kazakhstan Unplugged Bitcoin Miners Before Blackout Hit Region''

  4. The New York Times. "Sam Bankman-Fried Pleads Not Guilty to Fraud and Other Charges."

  5. Sam Bankman-Fried. Substack. ''FTX Pre-Mortem Overview."

  6. BNN Bloomberg. "Third Bankman-Fried Associate Nishad Singh Met With Prosecutors."

  7. U.S. Department of Justice. ''Gary Wang Plea Agreement''

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