FTX lawyers have filed a lawsuit against former CEO Sam Bankman-Fried, co-founder Zixiao Wang, and former senior executive Nishad Singh over the acquisition of stock-clearing platform Embed for $220 million.
According to the filing on May 17th, FTX paid the substantial amount to acquire Embed through its US subsidiary without conducting significant due diligence on the platform. The lawsuit claims that FTX performed “almost no due diligence” prior to the acquisition.
The legal action suggests that FTX is seeking to hold Bankman-Fried, Wang, and Singh accountable for their alleged lack of due diligence in the acquisition of Embed. The lawsuit raises concerns about the acquisition process and its potential impact on FTX’s operations and financial position.
After FTX filed for bankruptcy, the judge in charge of the proceedings approved the sales of Embed and other assets of FTX, but the top bidder for the platform offered just $1 million, with FTX’s lawyers stating:
“The bidders had figured out what the FTX Group and FTX Insiders did not bother to assess prior to the Embed acquisition, namely, that Embed’s vaunted software platform was essentially worthless.”
The lawyers further alleged that misleading records were created to obscure Alameda Research’s role in funding the Embed acquisition, claiming funds had been transferred between FTX entities, not from Bankman-Fried, Singh and Wang as claimed.
FTX has requested that the transactions related to the acquisition of Embed be labeled as “avoidable fraudulent transfers and obligations, and/or preferences.” This suggests that FTX believes there were irregularities or improper conduct involved in the acquisition process. The exchange is seeking to disallow claims made by the defendants until it can recover the funds lost through these avoidable transfers.
Having filed for bankruptcy on November 11th, 2022, FTX’s new leadership has been dedicated to recovering funds to repay customers and creditors. The focus has been on resolving the financial obligations resulting from the acquisition of Embed. Alongside this effort, FTX is reportedly considering a possible relaunch of the exchange, indicating its commitment to overcoming the challenges it has faced.
The legal action taken by FTX reflects its determination to address the alleged deficiencies in the acquisition process and recover the funds involved. By seeking to have the transactions labeled as avoidable fraudulent transfers, FTX aims to protect its interests and secure the necessary resources for repayment and potential relaunch.