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FTX Takes Legal Measures Against Former CEO and Staff Regarding $220 Million Embed Acquisition

18 May 2023
in Latest News, News
Reading Time: 3 mins read
102 6
Home News Latest News

FTX and its new management have initiated legal action against its former CEO, Sam Bankman-Fried, co-founder Zixiao Wang, and former senior employee Nishad Singh regarding the controversial  $220 million acquisition of stock-clearing platform Embed. The lawsuit alleges that FTX acquired Embed through its American subsidiary without conducting adequate due diligence prior to the transaction.

FTX’s legal team emphasized that the other bidders in the sale process recognized a significant discrepancy that FTX Group and FTX Insiders overlooked—the software platform of Embed, once considered valuable, actually held little to no worth. They noted that 11 out of the initial 12 entities that showed interest in acquiring Embed withdrew their final bids, with the highest withdrawn bid amounting to $78 million.

Michael Giles, the creator and former CEO of Embed, remained the sole bidder, and his final offer was a mere $1 million, with potential reductions expected upon closing the deal. FTX’s legal team alleged that despite Giles’ low bid, he personally profited over $157 million from the acquisition.

Additionally, the attorneys claimed that FTX insiders and previous management unlawfully used customer funds to facilitate the Embed acquisition. They argued that these insiders were fully aware of the company’s insolvency when finalizing the deal. The attorneys asserted that this deliberate effort constituted a significant fraud as it took advantage of FTX Group’s inadequate controls and recordkeeping practices.

The attorneys also contended that false records were created to conceal Alameda’s involvement in financing the Embed transaction. They argued that the money involved in the transaction had actually been transferred between various FTX entities, contradicting previous reports that it originated directly from Bankman-Fried, Singh, and Wang.

The previous FTX management had classified these transactions as “avoidable fraudulent transfers and obligations, and/or preferences.” The new management is seeking the dismissal of the defendants’ claims until FTX can recover the funds lost due to these avoidable transfers.

Since filing for bankruptcy in November, FTX’s new leadership dedicated to recovering funds and fulfilling obligations to creditors and consumers. This led to the judge approving the sale of FTX’s assets, including Embed. 

In addition to the lawsuit against its former CEO and employees, FTX has filed a separate lawsuit against Modulo Capital, a venture capital firm, seeking the return of $460 million in allegedly misappropriated customer funds. Settlement documents revealed that Bankman-Fried instructed Alameda Research to invest $475 million in Modulo through multiple transfers starting in May 2022.

 

If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

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Durotimi Aribisala

Durotimi Aribisala

Durotimi is a writer who is interested in writing about emerging technologies such as blockchain, Web3, crypto, and AI. He studied business administration and management. He desires to be an entrepreneur and movie director sometime in the future.

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