Before the bankruptcy of the exchange FTX, former Kazakh judo champion Rashit Makhat sold most of his shares in Genesis Digital Assets, a Bitcoin mining company, to SBF’s hedge fund, successfully cashing out at the market peak. This article is from The Wall Street Journal and has been translated, compiled, and written by Bitpush.
Table of Contents
FTX Liquidation Team’s Efforts to Recover Funds
Who is Rashit Makhat?
Makhat’s Successful Cash Out
Sam Bankman-Fried’s collapse of his crypto empire FTX led to the evaporation of billions of dollars, leaving many investors in despair. However, one person who managed to escape unscathed and enjoy enormous wealth is Rashit Makhat, a jiu-jitsu champion from Kazakhstan.
In the months leading up to the collapse of FTX, Rashit Makhat sold most of his shares in Genesis Digital Assets, a Bitcoin mining company, to SBF’s hedge fund, earning nearly $500 million. Makhat’s representative lawyer in London stated that he still owns these profits.
This transaction during the market peak made Makhat one of the largest individual beneficiaries. Prosecutors in the United States referred to him as one of the “mad buyers” after Bankman-Fried “stole” funds from FTX customers.
During the trial, prosecutors used detailed information such as bank account records and insider testimonies to show how much of the $8 billion in customer funds flowed into startups and other investments. SBF was convicted and is in detention awaiting sentencing.
The Genesis Digital transaction at the beginning of 2022 was one of the largest transactions of interest to the prosecutors. They presented a chart to the jury showing how over $1 billion in funds flowed from customers to Bankman-Fried’s hedge fund accounts, and then into Genesis Digital stocks. Makhat was not mentioned by the prosecutors and was not charged with any wrongdoing.
The prosecutors also highlighted Bankman-Fried’s dominant role in the transactions, including the purchase of real estate in the Bahamas and the $1.2 billion used to acquire Binance, a competitor cryptocurrency exchange that was once a shareholder of FTX.
The new management team formed after FTX’s bankruptcy is now trying to recover funds from some of SBF’s recipients, including SBF’s parents and a venture capitalist with a background in Hollywood representation. To win back the funds, lawyers typically need to prove that the recipients were overpaid before the bankruptcy. Bankman-Fried’s parents and agents have denied FTX’s claims in court.
Recovering all customer funds is not an easy task. Startups that have obtained most of the funds are likely to use them for their own operations. FTX can also sell the shares Bankman-Fried purchased in startups, but the value of many of these stocks, including Genesis Digital, has plummeted along with the cryptocurrency prices.
Lawyers and consultants involved in the bankruptcy case filed documents in early 2023 stating that the new management team of FTX is investigating Genesis Digital, similar to how they described their handling of other large FTX assets.
Overall, Bankman-Fried’s hedge fund Alameda Research made a total investment of $1.15 billion in Genesis Digital between mid-2021 and mid-2022, the largest investment in its portfolio of over $4 billion in startups and venture capital.
A spokesperson for Genesis Digital stated that the transaction with Bankman-Fried was a “direct secondary sale of company stocks,” which is common in many industries during strong market periods.
Makhat’s lawyer stated that the sale “was conducted in accordance with all applicable market rules and regulations” and that reputable law firms were engaged by both parties in the transaction. They said that his “stocks were acquired along with some other company founders.”
Makhat, 47, stated in an interview with Kazakh journalists in 2022 that he worked for several small companies in Kazakhstan in the early stages of his career while also engaging in sports.
In 2011, he won the world championship in the 200-pound category at the World Jiu-Jitsu Championship held in Lima, Peru.
Makhat also stated in the 2022 interview that he entered the cryptocurrency industry around 2016 when two German Bitcoin mining companies were looking for partners in Kazakhstan. Bitcoin mining requires a significant amount of energy-intensive computing power, and Kazakhstan has low-cost coal-powered electricity. Makhat and two other Kazakh entrepreneurs saw the opportunity and partnered with the German duo.
At the time, Makhat told reporters:
Rashit Makhat won the world championship in the 200-pound heavyweight category at the World Jiu-Jitsu Championship held in Lima, Peru in 2011. He said that he engaged in sports to further his career.
Yermek Alimov, a former business partner of Genesis Digital, stated that the new company, then called Powerry, was looking for power sources and started mining. Alimov had previously worked with Makhat in a gold mining company, and he claimed in a lawsuit filed in the UK against Genesis Digital, Makhat, and two other co-founders, that he should own shares in the company because he helped secure the power and cited text messages and other communication evidence.
A spokesperson for Genesis Digital, where the other two co-founders are still working, stated that Alimov’s claims about being owed money are false and that his only relationship with the company was selling and refurbishing a power plant.
Makhat’s lawyer stated that the court has not yet determined jurisdiction to hear the claim, so the defendant has not yet responded to Alimov’s claim.
When Bitcoin prices surged in 2021, Bankman-Fried pledged an initial investment of $100 million to Genesis Digital and later joined the company’s board. Other investors, such as Anthony Scaramucci’s SkyBridge Capital and venture capital fund Paradigm, also invested in the company.
In December 2021, SBF met with the President of Kazakhstan on a private jet and held a roundtable discussion with a group of foreign investors holding shares in Kazakh companies.
Shortly after, Bankman-Fried’s Alameda purchased most of Makhat’s Genesis stocks and bought a portion of the stocks from another co-founder for $80 million.
According to filings with the Securities and Exchange Commission and a knowledgeable source, Makhat received over $470 million in shares from Alameda in this transaction. In mid-2022, Bankman-Fried directly invested an additional $500 million in the company. The transaction valued Genesis Digital at around $5 billion.
Alameda is a well-known figure in Kazakhstan’s business community. He has served on the boards of several prominent companies, including one of the country’s largest banks, state-owned defense company Kazakhstan Engineering, telecom company Kcell, and advisory committee of the emerging payment company Kaspi.
According to filings with the Kazakhstan Securities Commission and information on the company’s website, Makhat worked for a company owned by Kairat Satybaldy, the nephew of Kazakhstan’s former president Nursultan Nazarbayev, and represented Kairat Satybaldy at a shareholders’ meeting of another company. Kairat Satybaldy is a well-known figure in Kazakhstan’s business community and is currently serving a six-year prison sentence for embezzlement of state assets. Kazakh officials stated this month that approximately $1.5 billion in assets related to him have been returned to the government since Satybaldy’s arrest in March 2022.
The resumes published by the two companies where Makhat served as a board director indicate that he worked as an advisor to the management committee chairman of Dunie Corp. from 2006 to 2009. Dunie Corp. is a small company in which Satybaldy held a 70% stake.
This information appeared on the archival website of Kazakhstan Engineering and in the publicly traded Kazkommertsbank’s 2015 and 2016 annual reports, April 2016 board meeting minutes, and press releases. The third company’s website, a real estate management company, shows that he also worked at Dunie.
Makhat’s lawyer stated that Makhat’s roles mentioned in the biography materials regarding Dunie are false and that he did not work for the company.
They said:
Satybaldy, through his lawyer, stated that he had no consultants at Dunie and that he was friends with Makhat but Makhat did not work for him.
According to the minutes of Kaspi’s board meetings, Makhat acted as Satybaldy’s representative at the 2017 Kaspi shareholders’ meeting. According to the board meeting minutes, Satybaldy, one of Kaspi’s largest shareholders, granted Makhat a power of attorney to represent him in voting.
Makhat’s lawyer stated that Satybaldy could not attend in person, so he allowed Makhat, a member of Kaspi’s advisory committee, to represent him at the meeting. They stated that the power was limited to this purpose and did not grant Makhat a general power of attorney. Satybaldy also granted similar powers to others at other Kaspi meetings.
SBF stated in his testimony that he invested in Genesis Digital because the company was able to produce Bitcoin at low cost. He stated that it could be a good investment if hedged properly against a Bitcoin price drop, although FTX did not take hedging measures.
Since Bankman-Fried’s investment, Genesis has expanded its operations to the United States and opened large new data centers for Bitcoin mining in Texas and South Carolina.
According to sources familiar with the plans, the company has informed investors that it plans to go public in the United States.
The CEO and co-founder of the company, Marco Streng, resigned from the board in the fall of last year and was succeeded by another co-founder, Andrey Kim, as CEO. Prior to that, the company’s chairman and co-founder, Abdumalik Mirakhmedov, left the board in 2022 and currently serves as an executive director, with his son taking over his position.
According to SkyBridge Capital, the value of Genesis Digital has plummeted. In September, the company estimated that its holdings of Genesis Digital shares have fallen 86% since the peak in early 2022.
Since September, the price of Bitcoin has risen over 50%, boosting the stock prices of some listed Bitcoin mining companies, but still not surpassing more than half of their historical highs.
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