The biggest beneficiary of FTX's collapse? A Brazilian Jiu-Jitsu champion who cashed out at the peak and avoided bankruptcy

2024.02.02

The biggest beneficiary of FTX's collapse? A Brazilian Jiu-Jitsu champion who cashed out at the peak and avoided bankruptcy

Several months before FTX collapsed, Rashit Makhat sold the majority of his shares in the bitcoin mining firm Genesis Digital Assets to SBF's hedge fund, receiving nearly $500 million in return.

2024.02.02 - 08:56:12

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Several months before FTX collapsed, Rashit Makhat sold the majority of his shares in the bitcoin mining firm Genesis Digital Assets to SBF's hedge fund, receiving nearly $500 million in return.

Source: The Wall Street Journal Translated by: BitpushNews Mary Liu Sam Bankman-Fried's (SBF) cryptocurrency empire, FTX, collapsed, wiping out tens of billions of dollars and leaving countless investors devastated. However, one individual who successfully avoided the disaster and walked away with a massive fortune is Rashit Makhat, a martial arts champion from Kazakhstan. Months before FTX’s collapse, Rashit Makhat sold most of his shares in the bitcoin mining firm Genesis Digital Assets to SBF’s hedge fund, earning nearly $500 million, according to Makhat’s legal representatives in London. He still holds onto those proceeds. This high-market transaction made Makhat one of the largest individual beneficiaries, which U.S. prosecutors described during the trial as part of Bankman-Fried’s frenzied spending spree funded by money “stolen” from FTX customers. During the prosecution, detailed evidence such as bank account records and insider testimonies were used to demonstrate how $8 billion in customer funds flowed into startups and other investments. SBF was convicted and remains in custody awaiting sentencing. The 2022 Genesis Digital deal was among the largest transactions highlighted by prosecutors, who presented jurors with a chart showing how more than $1 billion moved from customer accounts to accounts controlled by Bankman-Fried’s hedge fund and then into shares of Genesis Digital. Prosecutors did not name Makhat, who has not been accused of any wrongdoing. Prosecutors also spotlighted other deals orchestrated by Bankman-Fried, including purchases of Bahamian real estate and a $1.2 billion attempt to acquire Binance, a rival cryptocurrency exchange that had previously held a stake in FTX. New management installed after FTX’s bankruptcy is now fighting in court to recover funds from some of SBF’s recipients, including his parents and a Hollywood agent-turned-venture capitalist. To reclaim the money, lawyers typically need to prove recipients were overpaid before the bankruptcy. SBF’s parents and agents have rejected FTX’s claims in court. Recovering all customer funds will be extremely difficult. Startups that received large sums likely spent the money on operations. FTX could sell stakes that Bankman-Fried bought in these companies, but many of these holdings—including Genesis Digital—have plummeted in value along with falling cryptocurrency prices. Legal and advisory filings in early 2023 indicated that FTX’s new managers are investigating Genesis Digital, using similar language to describe their approach toward other major FTX-related assets. An FTX spokesperson declined to comment. Overall, Bankman-Fried’s hedge fund Alameda Research invested a total of $1.15 billion in Genesis Digital between mid-2021 and mid-2022, making it the single largest investment within its portfolio of more than $4 billion in startup and venture investments. A spokesperson for Genesis Digital said the transaction with Bankman-Fried was “a direct secondary sale of company stock—a common practice across many industries during strong market periods.” Makhat’s lawyers stated the sale “was conducted in accordance with all applicable market rules and regulations,” with both parties represented by reputable law firms. They added that his “shares were acquired alongside several other company founders.” The 47-year-old Makhat does not work at Genesis Digital, according to lawyers at Mishcon de Reya in London. He runs a venture capital firm in Dubai and posts on LinkedIn about the prospects of artificial intelligence. In a 2022 interview with Kazakh media, Makhat said he worked at several small Kazakh companies early in his career while also pursuing sports. In 2011, he won the world championship in the 200-pound division at the World Jiu-Jitsu Championship in Lima, Peru. In the same 2022 interview, Makhat said he entered the crypto industry around 2016 when two German bitcoin mining firms were seeking partners in Kazakhstan. Bitcoin mining requires energy-intensive computing power, and Kazakhstan offered cheap coal-based electricity. Makhat and two other Kazakh entrepreneurs saw an opportunity and partnered with the German duo. At the time, Makhat told reporters that with cryptocurrencies, “I don’t need banks or intermediaries; I can transact directly with you.” Rashit Makhat (top) won the 200-pound weight class at the 2011 World Jiu-Jitsu Championships in Lima, Peru. He said he pursued sports to advance his business career. Yermek Alimov, a former business partner of Genesis Digital, said the newly formed company, then called Powerry, sought power sources and began mining operations. Alimov, who previously collaborated with Makhat on a gold mining venture, filed a lawsuit in the UK against Genesis Digital, Makhat, and two other co-founders, claiming he should own shares in the company because he helped secure electricity, citing text messages and other communications as evidence. A spokesperson for Genesis Digital—where the other two co-founders still work—said Alimov’s claims about being owed money are false and that his only connection to the company was through the sale and renovation of a power station. Makhat’s lawyers said the court “has not yet determined whether it has jurisdiction over the claim,” so defendants have not yet responded to Alimov’s allegations. When bitcoin prices surged in 2021, Bankman-Fried committed an initial $100 million investment in Genesis Digital and joined its board. Other investors included Anthony Scaramucci’s SkyBridge Capital and venture capital firm Paradigm. In December 2021, SBF flew by private jet to meet with the President of Kazakhstan, joining a roundtable discussion with foreign investors holding stakes in Kazakh businesses. SBF (third from left) met with Kazakh President Kassym-Jomart Tokayev (fourth from right) in December 2021. Shortly afterward, Bankman-Fried’s Alameda purchased most of Makhat’s Genesis shares and acquired additional shares from another co-founder for $80 million. According to Cypriot corporate filings and a person familiar with the matter, Makhat received over $470 million from Alameda in the transaction. In mid-2022, Bankman-Fried directly invested another $500 million in the company. That deal valued Genesis Digital at approximately $5 billion. Alameda was well-connected in Kazakhstan’s business circles, having served on boards of prominent companies including one of the country’s largest banks, the state-owned defense giant Kazakhstan Engineering, telecom provider Kcell, and as an advisor to payment upstart Kaspi. Securities filings and company websites in Kazakhstan indicate Makhat worked at a company owned by Kairat Satybaldy, nephew of former Kazakh President Nursultan Nazarbayev, and represented Satybaldy at shareholder meetings of another company. Satybaldy is a notable figure in Kazakhstan’s business world who is currently serving a six-year prison sentence for embezzling state assets. Kazakh officials said in January that about $1.5 billion in assets linked to Satybaldy had been returned to the government since his arrest in March 2022. Biographical information published by two companies where Makhat served as a board director states he was an adviser to the management committee of Dunie Corp. from 2006 to 2009. Dunie Corp. was a small company in which Satybaldy held a 70% stake. This information appeared on the archived website of Kazakhstan Engineering and in annual reports of publicly traded Kazkommertsbank for 2015 and 2016, minutes from a board meeting in April 2016, and press releases. A third company—real estate management firm—also listed him as having worked at Dunie. Makhat’s lawyers said references to his role at Dunie in biographical materials are false and that he never worked for the company. “Our client has neither in the past nor ever worked for Mr. Satybaldy, either as an adviser to Dunie or any other company or in any other capacity,” they said. Satabldy, through his lawyer, said he had no advisers at Dunie and that while he and Makhat are friends, Makhat did not work for him. Rashit Makhat (left) and Kairat Satybaldy having lunch together with their wives in 2018. According to minutes from Kaspi board meetings, Makhat represented Satybaldy at a 2017 shareholder meeting of Kaspi. As one of Kaspi’s largest shareholders, Satybaldy granted Makhat a power of attorney to vote on his behalf. Makhat’s lawyers said Satybaldy could not attend in person, so he allowed Makhat—an existing member of Kaspi’s advisory council—to serve as his proxy. They emphasized this authority was strictly limited to that specific purpose and did not constitute a general power of attorney. Satybaldy had granted similar powers to others during other Kaspi meetings. In his testimony, SBF said he invested in Genesis Digital because the company could produce bitcoin at low cost. He said it could be a sound investment if properly hedged against bitcoin price declines, although FTX itself did not employ hedging strategies. Since Bankman-Fried’s investment, Genesis has expanded its operations into the United States, opening large new data centers for bitcoin mining in Texas and South Carolina. People familiar with the plan said the company has informed investors of its intention to pursue a U.S. initial public offering. Marco Streng, the company’s CEO and co-founder, stepped down from the board last fall and was succeeded as CEO by another co-founder, Andrey Kim. Previously, chairman and co-founder Abdumalik Mirakhmedov left the board in 2022 and now serves as executive president, with his son taking over his former position. Genesis Digital’s value has sharply declined, according to SkyBridge Capital. By September, the firm estimated the value of its Genesis Digital shares had dropped 86% from their peak in early 2022. Since September, bitcoin prices have risen more than 50%, boosting shares of some publicly traded bitcoin miners, though still remaining below more than half of their all-time highs.

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The biggest beneficiary of FTX's collapse? A Brazilian Jiu-Jitsu champion who cashed out at the peak and avoided bankruptcy

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