(Bloomberg) -- Bankrupt FTX Trading Ltd. is suing to recover $700 million that the failed crypto exchange paid venture capital firm K5 Global and its principals after they provided access to celebrities and politicians

K5 Global founder Michael Kives and managing member Bryan Baum allegedly profited by ingratiating themselves with former FTX Chief Executive Officer Sam Bankman-Fried, who transferred vast sums from FTX to K5 and related ventures without meaningful due diligence, according to FTX’s lawsuit, filed Thursday in Delaware bankruptcy court.

Bankman-Fried “was captivated” by Kives after attending a February 2022 dinner party at his house alongside guests including former politicians and a “centibillionaire CEO.” Days later, Bankman-Fried attended a Super Bowl party that included well-known celebrities, the lawsuit said.

In an internal note Bankman-Fried drafted shortly after the events, he said Kives and Baum were “something of a one-stop shop for relationships that we should utilize” and that in exchange, the pair wanted him and FTX to consider celebrity endorsements with their friends and “maybe us to invest in them or some stuff, idk.”

Within a few weeks, Bankman-Fried had signed a term sheet to invest billions in K5 Global and pay Kives and Baum each $125 million, the lawsuit said. By the end of September, and months before FTX collapsed, the crypto exchange and its related trading firm Alameda Research Ltd. had transferred $700 million to K5 Global affiliates, Kives and Baum, the complaint said.

“K5 was under the impression – like many others – that SBF was completely legitimate and they were entering into a fair, long-term, and mutually beneficial business relationship. Our belief is that the lawsuit is without merit,” a K5 Global spokeswoman said.

Representatives for Bankman-Fried didn’t immediately return emails Friday seeking comment.

The complaint adds new details to accusation that Bankman-Fried ran FTX in an amateur way, without the corporate safeguards typically used to close deals worth hundreds of millions of dollars.

For example, Bankman-Fried had FTX invest $300 million in a company owned by Kives and Baum before final transaction documents were put together. Bankman-Fried also failed to adequately investigate the company he was investing in, according to court documents.

“Even minimal due diligence would have revealed, for example, that K5 Global’s registered address was the personal residence of Baum’s parents in Florida,” the lawsuit alleges.

FTX also paid $214.5 million for a 38% stake in a company whose only assets were a minority stake in another company that held trademarks for a celebrity-backed tequila brand. That company was worth less than $3 million as of March 2022, according to the lawsuit.

Bankruptcy gives FTX tools to recover payments made before the firm filed Chapter 11. Thursday’s complaint is part of a broader effort by new FTX CEO John Ray and his advisers to recover funds that can repay creditors including customers whose cryptocurrency was held on the exchange before it collapsed in November. 

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