The FTX team in bankruptcy proceedings filed a lawsuit against former CEO Sam Bankman-Fried and other former executives over the Embed purchase at an inflated price. This, according to The Block.
According to lawyers, Bankman-Fried, FTX co-founder Gary Wang, and former CTO Nishad Singh knew that, at the time the purchase of the clearing service closed in September 2022, the exchange and the affiliated Alameda Research were already insolvent.
According to the complaint, the FTX/Alameda executives fraudulently used customer funds to buy the platform for almost $250 million.
Separate lawsuits filed by FTX managers targeted Embed founder Michael Giles and early investors who sold their stakes during the deal. The defendants were asked to return the proceeds, without alleging criminal wrongdoing.
Lawyers noted that the Embed purchase was conducted without proper due diligence. The purchase proved to be “useless,” as the clearing platform did not meet the claimed functionalities.
Giles’ stake amounted to $157 million. The Embed founder, who also served as CEO, additionally received an “extravagant and unwarranted” stay-on bonus of $55 million, with no real obligation for Giles to stay on in the role, the FTX-appointed managers noted.
In January the court allowed FTX to sell a business unit to raise liquidity for settlements with creditors
According to lawyers, the auction for the clearing platform demonstrated how inflated the purchase price was. In the bidding, the highest bid of $1 million was placed by Giles himself.
The U.S. prosecutor’s office has charged Bankman-Fried with 13 criminal offenses. In May, the lawyers for the former FTX CEO asked the court to drop almost all charges.