Bankrupt cryptocurrency entities FTX, FTX.US and Alameda Research have sued former CEOs Sam Bankman-Fried (SBF), Nishad Singh and Gary Wang for lavishly spending FTX Group assets on the acquisition of equity-clearing firm Embed Financial Technologies.
The move is the first official action from FTX CEO John Ray against the company’s previous management. suit foot In the United States Bankruptcy Court for the District of Delaware, it is seeking to recover the money spent during the acquisition.
FTX is suing SBF and its inner circle
According to the court document, the plaintiffs accused the former management of taking advantage of FTX Group’s lack of controls and record-keeping to inflate Embed’s valuation and intentionally buying the platform for more than it was worth.
The defendants, who are directed to FTX Insiders, did little due diligence on Embed, because they prioritized speed above everything else in the transaction. They agreed to all terms proposed during negotiations by Michael Giles, Embed’s founder and CEO, who was also the sole representative.
Giles walked away from the deal with approximately $157 million and an “exorbitant and unjustified retention premium” as an incentive to quickly complete the sale.
FTX began acquisition negotiations with Giles at the end of March 2022. By mid-April of the same year, the two parties signed a “Memorandum of Terms”, allocating an enterprise $220 million to Embed with a $75 million retention bonus for platform employees, including $55 million in platform employees. for Giles.
However, when the deal was finalized in September — just weeks before FTX Group went bankrupt — FTX insiders had spent more than $248 million to acquire Embed. The plaintiffs allege that while the deal took about six months, the basic terms were negotiated and agreed upon within two weeks.
FTX seeks $250 million in recovery
Further, plaintiffs charged SBF, Singh, and Wang with causing the bankrupt entity to issue simple stock future agreements (SAFEs), which can be converted into common stock if it files for Chapter 11 bankruptcy.
Ray is seeking through his attorney to have the safe deposits canceled and to recover the money spent during the Embed acquisition. The plaintiffs also asked the court to order the defendants to bear the legal costs of the lawsuit.
Meanwhile, the plaintiffs too foot Deduction action against Giles, employees and former shareholders of Embed. Some of his past stockholders include Silicon Valley venture capital firms such as Y Combinator, Bain Capital Ventures, and 9 Yards.
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