Failed crypto exchange FTX is suing co-founder and former Chief Executive Sam Bankman-Fried and others, seeking to claw back about $240 million related to the company’s acquisition of stock-trading platform Embed.
In a filing Wednesday in U.S. Bankruptcy Court in Delaware, FTX claimed Bankman-Fried and others — including FTX co-founders Zixiao Wang and Nishad Singh — conducted little to no due diligence and rushed the $240 million acquisition ahead of FTX’s collapse last November.
The lawsuit claimed money for the Embed acquisition came from Alameda Research, FTX’s affiliated hedge fund, which had illegally diverted assets belonging to FTX — constituting fraud.
“The FTX insiders purportedly pursued the Embed acquisition because they
believed it would help expand FTX.US’s operations into conventional securities markets, thereby enriching themselves,” the suit claimed, and FTX ended up paying a “wildly inflated” price for Embed.
In a related filing Wednesday, FTX also sued Embed founder Michael Giles and other former Embed workers and shareholders.
The deal for Embed closed just six weeks before FTX filed for bankruptcy on Nov. 11.
FTX, under new management, recently tried to sell Embed as part of a bankruptcy-related asset sale, but it received a high bid of only $1 million — from Giles himself, the suit said, claiming other bidders had figured out that “Embed’s vaunted software platform was essentially worthless.”
FTX’s Wang and Singh have already pleaded guilty to crimes that facilitated the acquisition of Embed, the suit noted. Bankman-Fried has been charged by federal prosecutors with multiple counts of conspiracy and fraud.