In a high-stakes courtroom drama that’s caught the attention of the crypto world, FTX’s new leadership is suing former chief Sam Bankman-Fried and two other former executives for a whopping $220 million. The cause? A dodgy deal made just before the company went belly up.
FTX, once a formidable force in the crypto arena, claims its former leaders Bankman-Fried, Zixiao Wang, and Nishad Singh failed to adequately vet the stock-clearing platform, Embed, before snapping it up for $220 million. The lawsuit argues that the former executives, blinded by optimism or greed, didn’t even bat an eye before buying the company, allegedly without conducting any substantial due diligence.
The case’s central character, Embed, turned out to be a dud. Post-FTX’s bankruptcy, when its assets, including Embed, were up for grabs, the highest bid for the platform was a paltry $1 million – a staggering 99.5% drop in value. The FTX legal team didn’t mince words, accusing their former leaders of overlooking the fact that “Embed’s vaunted software platform was essentially worthless.”
And here’s the twist: The lone final bid came from none other than Embed’s original founder and former CEO, Michael Giles, who had previously pocketed a cool $157 million from FTX’s acquisition. Despite being once at the helm of a $220 million venture, his final bid was a meager $1 million, which might even see further reductions at closing.
But the accusations don’t stop there. The legal eagles at FTX charge that the former execs capitalized on lax oversight within the company to pull off a “massive fraud”. This, they allege, involved misusing customer funds to buy Embed, even though they knew the company was on the brink of insolvency. Further claims of fishy financial record-keeping, designed to cover up Alameda Research’s role in funding the Embed deal, have also surfaced. FTX is now seeking to reclaim the lost millions in a bid to repay its customers and creditors and possibly breathe new life into the exchange.