Billions of dollars vanished with the collapse of Sam Bankman-Fried’s FTX cryptocurrency empire. Amidst the fallout, one individual finds himself perched atop a mountain of that wealth: Rashit Makhat, a robust jujitsu champion hailing from Kazakhstan.
Months before the downfall of FTX, Makhat struck a monumental deal, pocketing nearly $500 million by selling off most of his share in Genesis Digital Assets, a bitcoin-mining venture, to Bankman-Fried’s hedge fund. Makhat’s legal representatives in London assert that he retains possession of the proceeds.
This landmark transaction catapulted Makhat into the ranks of the largest individual beneficiaries of what U.S. prosecutors labeled as a “spending spree” involving funds misappropriated by Bankman-Fried from FTX customers. Bankman-Fried’s subsequent conviction and detention pending sentencing underscored the gravity of the situation.
Prosecutors showcased the early 2022 Genesis Digital deal as a prime example, revealing to jurors a financial flowchart demonstrating how over $1 billion from customers flowed through Bankman-Fried’s hedge fund and into Genesis Digital shares. Notably, Makhat’s involvement wasn’t explicitly mentioned, and he hasn’t faced any accusations of wrongdoing.
The prosecution also spotlighted Bankman-Fried-led transactions, including property acquisitions in the Bahamas and a $1.2 billion investment to acquire the rival crypto exchange Binance, previously an FTX shareholder.
In the aftermath of FTX’s bankruptcy filing and subsequent management overhaul, legal battles have erupted to reclaim funds distributed by Bankman-Fried, targeting recipients like his parents and a former Hollywood agent turned venture capitalist. However, retrieving all customer funds remains a daunting challenge, especially given that many startups that received funds likely expended them on their own ventures. FTX’s efforts to recover stakes in startups, including Genesis Digital, face additional hurdles amid the cryptocurrency market downturn.
Documents filed during the bankruptcy proceedings indicate that FTX’s new management is scrutinizing Genesis Digital and other substantial holdings as part of their investigation. Yet, the road to full restitution for customers remains uncertain, with the value of assets and the complexity of legal proceedings adding layers of complexity to the ordeal.
A spokesperson for FTX management declined to provide further comment on the matter.
FTX’s Sam Bankman-Fried, left, was convicted of stealing customer money and is in custody awaiting sentencing. PHOTO: DAVID DEE DELGADO/REUTERS
Between mid-2021 and mid-2022, Bankman-Fried’s hedge fund Alameda Research poured $1.15 billion into Genesis Digital, marking the largest investment within its expansive $4 billion startup and venture capital portfolio.
A spokesperson for Genesis Digital characterized the deal with Bankman-Fried as a routine secondary sale of company shares, typical in robust markets across various industries.
Legal representatives for Makhat emphasized that the transaction adhered to all relevant market regulations, facilitated by reputable law firms representing both parties. They clarified that Makhat’s shares were acquired alongside those of other company founders.
Despite his substantial stake, Makhat, 47, holds no operational role at Genesis Digital, according to his legal team at Mishcon de Reya, a London-based law firm. Instead, he leads a venture capital firm in Dubai, where he advocates for the advancement of artificial intelligence, as evidenced by his LinkedIn activity.
Makhat’s professional journey evolved from his early involvement with various small Kazakh companies, concurrently pursuing his passion for sports. He achieved international recognition in 2011 as the world champion in the 200-pound weight category at the World Ju-Jitsu Championship held in Lima, Peru.
His foray into cryptocurrency commenced around 2016, when he collaborated with two German bitcoin miners seeking partnerships in Kazakhstan, drawn by the country’s abundant and cost-effective coal-based energy supply. Makhat, alongside two fellow Kazakh entrepreneurs, seized the opportunity presented by Kazakhstan’s favorable energy landscape to engage in bitcoin mining operations.
Reflecting on the transformative potential of cryptocurrency, Makhat highlighted its capacity to enable direct transactions without intermediaries or reliance on traditional banking systems, emphasizing its disruptive nature in financial ecosystems.
Rashit Makhat, top, at the 2011 World Ju-Jitsu Championship in Lima, Peru, where he was world champion in the 200-pound weight category. He said he did sports on the side of his business career. PHOTO: AJJIF GLOBAL
Powerry, now known as Genesis Digital, embarked on its journey by seeking out electricity sources and initiating mining operations, as recounted by Yermek Alimov, a former business associate of the company’s co-founders.
Alimov, previously engaged with Makhat in a gold-mining venture, claims in a legal dispute against Genesis Digital, Makhat, and two other co-founders that he deserves a share in the enterprise due to his assistance in securing electricity, supported by text messages and other correspondence.
A spokesperson for Genesis Digital, where the remaining co-founders are actively involved, refuted Alimov’s assertion of being owed money, stating that his involvement was limited to the sale and renovation of a power station.
Legal representatives for Makhat stated that the court is yet to decide on its jurisdiction to adjudicate the claim, and as a result, the defendants have not submitted responses to Alimov’s allegations.
Amidst the bitcoin price surge in 2021, Bankman-Fried committed an initial $100 million investment in Genesis Digital and later assumed a seat on the company’s board. Notably, Anthony Scaramucci’s SkyBridge Capital, alongside venture capital firm Paradigm and other entities, injected additional capital into the venture.
Bankman-Fried’s engagement extended to a private jet trip in December 2021 to meet with the Kazakh president, participating in a roundtable discussion involving foreign investors with interests in Kazakh enterprises.
Sam Bankman-Fried, third from left, at a December 2021 meeting with Kazakh President Kassym-Jomart Tokayev, fourth from right. PHOTO: OFFICE OF THE PRESIDENT OF KAZAKHS
Shortly thereafter, Alameda, led by Bankman-Fried, acquired the majority of Makhat’s shares in Genesis and purchased $80 million worth of shares from another co-founder. According to corporate filings in Cyprus and information from a source familiar with the transaction, Makhat received over $470 million from Alameda for his shares in that transaction. Additionally, Bankman-Fried injected an additional $500 million directly into Genesis Digital in mid-2022, valuing the company at approximately $5 billion.
Makhat boasts extensive experience in the Kazakh business landscape. He held positions on the boards of notable corporations, including one of the country’s largest banks, the major state-owned defense firm Kazakhstan Engineering, and the telecommunications company Kcell. Moreover, he served on the advisory board of the rapidly expanding payments company Kaspi.
According to Kazakh securities filings and information available on company websites, Makhat was associated with a company owned by Kairat Satybaldy, the nephew of former Kazakh President Nursultan Nazarbayev. He represented Satybaldy at a shareholders’ meeting of another company. Satybaldy, a prominent figure in Kazakh business, is presently serving a six-year prison sentence following a conviction for embezzlement of state assets. Kazakh officials reported this month that approximately $1.5 billion in assets linked to Satybaldy have been repatriated to the government since his arrest in March 2022.
Biographical details featured on the archived websites of Kazakhstan Engineering, as well as in the annual reports of publicly traded Kazkommertsbank for 2015 and 2016, April 2016 board minutes, and a press release, indicate that Makhat served as an adviser to the chairman of the management board of Dunie Corp. from 2006 to 2009. However, Makhat’s legal representatives assert that these references to his role at Dunie are inaccurate, and he never worked for the company.
Makhat’s lawyers emphasized, “Our client did not work, and has never worked, for Mr. Satybaldy, either as an adviser or otherwise, in respect of Dunie Corporation or any other company.”
Satybaldy, responding through legal representation, stated that he did not engage any advisers at Dunie and clarified that while he and Makhat were friends, Makhat was not employed by him.
In the photograph, Rashit Makhat and Kairat Satybaldy, accompanied by their wives, are seen at a lunch gathering in 2018. PHOTO: YERMEK ALI
Makhat acted as Satybaldy’s representative during a 2017 shareholders’ meeting of Kaspi, as documented in its board minutes. Given that Satybaldy, a significant Kaspi shareholder, couldn’t attend physically, he authorized Makhat, a member of Kaspi’s advisory board, to vote on his behalf. Makhat’s legal representatives clarified that the authorization was specific to this event and didn’t entail a general power of attorney. Similar permissions were granted by Satybaldy to others for various Kaspi meetings.
Bankman-Fried testified that he decided to invest in Genesis Digital because the company demonstrated the capability to mine bitcoin at a low cost. He noted that with appropriate hedging against a potential decline in bitcoin prices, the investment could have been advantageous, yet FTX failed to implement the hedge.
Following Bankman-Fried’s investment, Genesis expanded its operations into the United States, establishing significant new bitcoin mining data centers in Texas and South Carolina. Plans for an initial public offering (IPO) in the U.S. have been disclosed to investors by the company, as per sources familiar with the matter.
In organizational changes, co-founder Marco Streng stepped down from his position as chief executive officer and board member last fall. Andrey Kim, another co-founder, succeeded him as CEO. Additionally, the departure of Abdumalik Mirakhmedov, the company’s co-founder and chairman, occurred in 2022, with him assuming the role of executive president. His son has taken over his former board seat.
The value of Genesis Digital has experienced a significant decline, according to SkyBridge Capital. By September, the firm estimated an 86% decrease in the value of its stake in Genesis Digital since its peak in early 2022. Despite a subsequent increase in bitcoin prices of over 50% since September, the values of listed shares of certain bitcoin miners have dropped by more than half from their peak levels.