Before the bankruptcy of the exchange FTX, former Kazakh judo champion Rashit Makhat sold most of his shares in the Bitcoin mining company Genesis Digital Assets to SBF’s hedge fund, successfully cashing out at the market peak. This article is sourced from “The Wall Street Journal” and translated and compiled by Bitpush.
FTX Liquidation Team Strives to Recover Funds
Who is Rashit Makhat?
Makhat’s Successful Cashout
The collapse of Sam Bankman-Fried’s (SBF) crypto empire FTX has resulted in the evaporation of billions of dollars, leaving many investors in tears. However, one person who successfully escaped the disaster and enjoyed a huge fortune 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 he owned, to SBF’s hedge fund, earning nearly $500 million. Makhat’s representative lawyer in London stated that he still owns these proceeds.
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 “buying spree” after Bankman-Fried “stole” funds from FTX customers.
During the trial, prosecutors used detailed information such as bank account records and insider testimony to show how much of the $8 billion in customer funds flowed into startups and other investments. SBF has been convicted and is currently detained awaiting sentencing.
The Genesis Digital deal at the beginning of 2022 was one of the largest transactions highlighted by prosecutors. They presented a chart showing how over $1 billion was transferred from customer accounts to Bankman-Fried’s hedge fund, and then into Genesis Digital stocks. Makhat was not mentioned by the prosecutors and was not charged with any wrongdoing.
Prosecutors also highlighted Bankman-Fried’s leading transactions, including the purchase of Bahamian properties and a $1.2 billion acquisition of Binance, a competing cryptocurrency exchange that was previously a shareholder of FTX.
The new management team established after FTX’s bankruptcy is currently working in court to recover funds from some of SBF’s recipients, including SBF’s parents and a risk investor with a Hollywood agent background. To win back the funds, lawyers usually need to prove that the recipients were overpaid before the bankruptcy. Bankman-Fried’s parents and agents have rejected 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 the funds 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 decline in cryptocurrency prices.
Lawyers and advisors stated in the bankruptcy case files submitted in early 2023 that the new managers of FTX are investigating Genesis Digital, similar to how they described their handling of other major FTX assets.
Overall, Bankman-Fried’s hedge fund Alameda Research made a total investment of $1.15 billion in Genesis Digital from mid-2021 to mid-2022, making it 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 stock, which is common in many industries during strong market conditions.”
Makhat’s lawyer stated that the sale was “conducted in accordance with all applicable market rules and regulations,” and both parties to the transaction hired reputable law firms. They said that his “shares were acquired along with some other company founders.”
47-year-old Makhat, a lawyer at Mishcon de Reya in London, stated that he does not work for Genesis Digital. He operates a venture investment company in Dubai and has released posts on LinkedIn about the prospects of artificial intelligence.
In an interview with Kazakh journalists in 2022, Makhat stated 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 weight class at the World Jiu-Jitsu Championship held in Lima, Peru.
In the same interview in 2022, Makhat stated that he entered the crypto industry around 2016 when two German Bitcoin mining companies were looking for partners in Kazakhstan. Bitcoin mining requires intensive computational power and Kazakhstan has low-cost coal power. Makhat and two other Kazakh entrepreneurs saw the opportunity and teamed up with the German duo.
At that time, Makhat told reporters:
Rashit Makhat won the world championship in the 200-pound weight class at the World Jiu-Jitsu Championship held in Lima, Peru in 2011. He said he engaged in sports to pursue a 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. In a lawsuit filed in the UK against Genesis Digital, Makhat, and two other co-founders, Alimov claimed that he should have a share in the company because he helped secure power and cited text messages and other communication evidence.
A spokesperson for Genesis Digital, where the other two co-founders still work, stated that Alimov’s claim of being owed money is incorrect and said his only relationship with the company was selling and renovating a power plant.
Makhat’s lawyer stated that the court has “not yet determined whether it has jurisdiction to hear the claim,” so the defendants have not filed a defense against Alimov’s claim.
When the price of Bitcoin soared in 2021, Bankman-Fried promised an initial investment of $100 million to Genesis Digital and subsequently joined the company’s board. Other investors include Anthony Scaramucci’s SkyBridge Capital and venture capital fund Paradigm.
In December 2021, SBF met with the President of Kazakhstan on a private plane 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 shares and acquired a portion of the shares from another co-founder for $80 million.
According to filings with the Cyprus company registry and a knowledgeable source, Makhat received over $470 million in shares from Alameda in this transaction. In mid-2022, Bankman-Fried made a direct investment of $500 million in the company. The valuation of Genesis Digital was approximately $5 billion.
Alameda is a prominent figure in the Kazakh business community. He has served on the boards of several well-known companies, including one of the country’s largest banks, the major state-owned defense company Kazakhstan Engineering, the telecommunications company Kcell, and the advisory committee of the emerging payment company Kaspi.
Filings with the Kazakhstan Securities Registry and information on the company’s website indicate that Makhat worked for a company owned by Kairat Satybaldy, the nephew of former Kazakh President Nursultan Nazarbayev, and represented Kairat Satybaldy at a shareholders’ meeting of another company. Kairat Satybaldy is a well-known figure in the Kazakh business community and is currently serving a six-year prison sentence for embezzlement of state assets. Kazakh officials stated earlier 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 member, according to the materials on the Kazakhstan Engineering archive website and the public filings of Kazkommertsbank for 2015 and 2016, the board meeting records in April 2016, and press releases. The information on the website of the real estate management company shows that he has worked at Dunie.
Makhat’s lawyer stated that Makhat’s roles mentioned in the biographical materials for Dunie are false and he did not work at the company.
They said:
Satybaldy, through his lawyer, stated that he had no consultants at Dunie and that he is friends with Makhat but Makhat does not work for him.
According to the minutes of Kaspi’s board meetings, Makhat represented Satybaldy at the 2017 Kaspi shareholders’ meeting. According to the board meeting records, Satybaldy, one of Kaspi’s largest shareholders, granted Makhat the authorization to vote on his behalf.
Makhat’s lawyer stated that Satybaldy was unable to attend in person, so he allowed Makhat, a member of the Kaspi Advisory Committee, to serve as his representative at the meeting. They stated that this authority was limited to this purpose and did not grant Makhat general authority. Satybaldy also granted similar authority 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 a low cost. He stated that it could be a good investment if hedged against a decline in Bitcoin prices, 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 plan, the company has informed investors that it plans to go public in the United States.
Marco Streng, the CEO and co-founder of the company, resigned from the board in the fall of last year and was succeeded by another co-founder, Andrey Kim, as CEO. Prior to that, co-founder Abdumalik Mirakhmedov left the board in 2022 and currently serves as 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 in Genesis Digital were down 86% from their 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 well below their historical highs.
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