FTX sues SBF, others over ‘worthless’ fintech company acquisition
Bankrupt cryptocurrency exchange FTX has sued Sam Bankman Freed (SBF) and other former executives of the company over its $250 million acquisition of stock-clearing platform Embed.
SBF and other executives, Nishad Singh and Gary Wonder, knew Alameda Research was in bankruptcy and still went ahead with the deal, according to court filings on May 17. . In addition, the lawsuit alleges that the contract amount was significantly higher.
The FTX liquidators filed suit in the Delaware bankruptcy court. Part of their allegation is that SBF and his fellow executives intentionally accepted FTX client funds to complete the acquisition on behalf of Alameda.
Meanwhile, FTX is also suing Embed co-founder Michael Giles and other early investors, including venture capital firm Propel Ventures Partners. The lawsuit seeks to recover funds from what FTX liquidators describe as fraudulent transactions.
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The complaint alleges that FTX’s former leadership made bad deals and had a complete lack of due diligence. Supporting these suspicions is an internal message that the platform cannot “handle about 600 new user accounts”, even though the release plan specified him as 10,000.
As of March 31, 2022, Embed had assets worth $37 million and had a profit of $25,000, according to court filings.
But under SBF, FTX’s leadership not only paid out shareholders’ equity, but also gave Embed’s co-founder and CEO at the time a $55 million retention bonus. He didn’t have to stay with the company to receive the bonus.
“WRS paid Embed far more than its fair or reasonably comparable consideration and gave Giles an unfair and extravagant retention bonus as an incentive to expedite the completion of the acquisition.”
Moreover, when it tried to sell its fintech platform, it turned out that the company had no investors above $1 million. Co-founder Giles was the only investor willing to pay that amount, according to filings.
“Of the 11 other potential bidders, after conducting more comprehensive due diligence, only one made a final bid for just $250,000, and only in Embedded assets. The debtor would be held responsible for all of Embed’s debts.”
Lawsuit further exposes FTX’s poor corporate governance practices under SBF
The lawsuit revealed new facts about FTX, but generally demonstrated the company’s poor practices and lack of due diligence during the time SBF was in charge.
lawyer Claim SBF paid the company far more than it was worth. Attempts to sell Embed have been unsuccessful since liquidators took over FTX.
“They performed little due diligence on Embed and accepted key terms proposed by Embed’s founder, CEO and sole representative, Giles, during negotiations. received approximately $157 million.”
The story of FTX suing SBF and others over its acquisition of a “worthless” fintech company first appeared on CryptoSlate.