The collapse of FTX, once a titan in the cryptocurrency exchange realm, sent shockwaves through the financial world. At the heart of this downfall lies a colossal investment in Kazakhstan’s Genesis Digital Assets, raising questions about the intricate web of international finance, regulatory oversights, and the elusive figures behind the scenes.
Genesis Digital Assets: The Kazakh Connection
In 2017, according to Novastan France, Genesis Digital Assets (GDA) was established, co-founded by Kazakh businessmen Rashit Mahat, Abdumalik Mirakhmedov, and Andrei Kim, alongside German crypto specialists Marco Krohn and Marco Streng. The company quickly became a significant player in the Bitcoin mining industry, leveraging Kazakhstan’s cheap electricity and favorable regulatory environment.
By 2021, Kazakhstan, according to Novastan France, had become the second-largest Bitcoin producer globally, with up to 7% of its national energy production dedicated to cryptocurrency mining . GDA capitalized on this boom, operating massive data centers consuming approximately 280 megawatts—enough to power a small city.
FTX’s Investment: A Billion-Dollar Gamble
Sam Bankman-Fried, through his hedge fund Alameda Research, invested a staggering $1.1 billion into GDA between August 2021 and April 2022. This investment, according to Investopedia, was the largest made by FTX and included four transactions: $100 million in August 2021, $550 million in January, $250 million in February, and $250 million in April 2022.
Notably, only half of this investment went into GDA’s operations. The remaining funds were used to purchase existing shares from two of GDA’s co-founders, raising eyebrows about the nature of the transaction.
The Enigmatic Rashit Mahat
Rashit Mahat, a central figure in GDA, remains shrouded in mystery. Despite his significant role, Mahat has maintained a low public profile. He is known to have served on the board of directors for Kcell, a major telecommunications company in Kazakhstan, and has connections to other prominent businesses.
Mahat’s only known interview was in response to allegations of extortion against journalist Makhambet Abzhan. In the interview, Mahat denied any wrongdoing and refuted claims of connections to political figures.
Regulatory Crackdown in Kazakhstan
The FTX debacle prompted Kazakhstan to reevaluate its cryptocurrency regulations. In July 2022, the government imposed a tax on energy used for crypto mining. Further measures were announced in February 2023, set to take effect in January 2024, requiring crypto mines to obtain state licenses and purchase electricity only when there is a surplus. Additionally, at least 50% of coins produced in Kazakhstan must be traded through platforms registered with the Astana International Financial Centre, increasing to 75% by 2025.
The Aftermath: FTX’s Collapse and Legal Pursuits
FTX’s bankruptcy in November 2022 revealed an $8 billion deficit in customer funds. Bankman-Fried was arrested in the Bahamas in December 2022 and extradited to the United States, facing multiple charges, including wire fraud and money laundering. In March 2024, he was sentenced to 25 years in prison and ordered to forfeit $11 billion.
U.S. prosecutors have expressed interest in questioning Rashit Mahat regarding the GDA investment. However, Mahat’s current whereabouts are unknown, and he has not been charged with any wrongdoing.
The FTX saga underscores the complexities and risks inherent in the rapidly evolving cryptocurrency landscape. The massive investment in Kazakhstan’s Genesis Digital Assets highlights the global reach of crypto ventures and the challenges regulators face in overseeing such cross-border financial activities. As investigations continue, the full extent of the entanglements between FTX, GDA, and figures like Rashit Mahat remains to be seen.
