Sam Bankman-Fried, the previous CEO of FTX, and other top executives are the targets of a lawsuit filed on May 17 over the purchase of Embed, which the company's current leadership believes was made without performing adequate due diligence.
The management of FTX is attempting to recover more than $240 million from executives and insiders who benefitted from FTX's "wildly inflated" purchase of stock-clearing platform Embed in September.
A lawsuit was brought on May 17 against former FTX CEO Sam Bankman-Fried and other senior officials over the acquisition of Embed, which the company's current leadership claims was done without sufficient due diligence.
In an effort to recoup more than $240 million, the management of FTX is suing insiders and executives who benefited from the company's "wildly inflated" purchase of the stock-clearing platform Embed in September. On May 17, a lawsuit was filed against former FTX CEO Sam Bankman-Fried and other top executives over the purchase of Embed, which the current leadership of the business believes was made without performing adequate due diligence.
On the other hand, another complaint was filed on the same day, accusing FTX of paying a "wildly inflated" price of $220 million for the stock-trading platform and attempting to recover money from Embed CEO Michael Giles and its stockholders.
After only a brief discussion with Giles, Laurence Beal, Embed's own chief technology officer, reportedly expressed surprise that FTX paid such a high price for the business. Beal used a cowboy emoji to depict FTX's due diligence procedure in a message to a senior employee at Embed.
They seem to be [cowboy emoji] over there, in my opinion.
Employee retention bonuses of $70 million were also given to Embed workers by FTX as part of the acquisition. Giles received the majority of that money ($55 million), which subsequently caused him to worry about how he would explain it to other workers.
Giles received an astounding $490,000 each day between the date he signed the acquisition agreement on June 10, 2022, and the day the transaction closed on September 30, 2022, assuming he worked seven days per week. As Embed's largest shareholder, he was also given an extra $103 million after the acquisition was finalised.
This sum is far lower than Giles' regular monthly income as CEO of Embed, which is $12,500.
Giles was the only Embed employee to get his whole retention incentive on the closing date, despite several others receiving retention payment agreements. To be eligible for their full incentives, the other workers had to work at Embed for two years.
FTX will now try to recoup $236.8 million from Giles and Embed executives as well as an extra $6.9 million from Embed's smaller shareholders as a result of these excessive distributions to Embed insiders.
Additionally, attorneys claimed that FTX insiders utilised misallocated money to assist the acquisition of Embed despite being fully aware of FTX's insolvency at the time the sale was finalised. This was done in order to "perpetrate a massive fraud" and "take advantage of the FTX Group's lack of controls and recordkeeping."
On November 11, 2022, FTX filed for Chapter 11 bankruptcy protection. The new management of the companies, led by bankruptcy lawyer John Ray III, has been concentrated on recovering money to pay back clients and creditors. More recently, FTX attorneys debated the idea of restarting the exchange.
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