- FTX and Alameda Research filed lawsuits against former executives Sam Bankman-Fried, Gary Wang, and Nishad Singh, leading to a $240 million loss for the companies
- The lawsuit claims that the ex-executives overvalued Embed, purchased it without proper investigation, and accepted all terms set by its CEO Michael Giles, including an excessive $55 million retention bonus
- New FTX CEO John Ray is pursuing legal action against previous management and executives to save the company and recover funds lost in the Embed acquisition
A shocking revelation has emerged in the cryptocurrency sphere as FTX, a top-tier digital currency exchange, and its affiliate Alameda Research, a renowned crypto hedge fund, have initiated legal proceedings against their ex-executives Sam Bankman-Fried (SBF), Gary Wang, and Nishad Singh.
The legal action claims that these former executives mishandled finances and neglected to perform adequate due diligence before purchasing Embed Financial Technologies. This stock trading platform collapsed soon after the transaction was completed. FTX and Alameda Research aim to recoup approximately $240 million spent on the ill-fated acquisition.
Court filings reveal that FTX and Alameda Research assert that the ex-executives, referred to as “FTX Insiders” in the lawsuit, exploited weak controls and insufficient recordkeeping at FTX, leading to an overvaluation of Embed.
The plaintiffs argue that the former executives hastily acquired Embed for a price far above its actual worth without conducting due diligence on the platform or its founder and CEO, Michael Giles. The lawsuit also alleges that Giles received an excessive and unjustified retention bonus of $55 million as part of the $220 million deal.
According to the lawsuit, discussions with Giles commenced in late March 2022 and concluded by mid-April 2022, resulting in both parties signing a “Memorandum of Terms.” The plaintiffs claim that this expedited timeline was unusually swift for such a complex deal, and the former executives accepted all of Giles’ terms without proper examination or validation.
The lawsuit further highlights that FTX’s former president discovered several glitches in the Embed platform before finalizing the acquisition, and even Giles himself confessed that the platform encountered numerous issues daily.
The agreement was reached just weeks before FTX declared bankruptcy in May 2022, following significant losses due to market fluctuations and regulatory constraints.
John Ray, FTX’s new CEO who succeeded SBF in April 2022, has launched a series of legal actions against previous management and executives to rescue the company and regain some of the funds lost in the Embed purchase. The lawsuit against SBF and his co-defendants is considered Ray’s inaugural formal action targeting his forerunners.
FTX from Hero to Zero
Once a shining star in the crypto landscape, FTX was renowned for its meteoric rise and innovative trading solutions, solidifying its position among the world’s best-performing digital currency exchanges. However, recent events have led to a spectacular downfall, transforming FTX into one of history’s most catastrophic financial institutions.
The ill-advised acquisition of Embed Financial Technologies, coupled with claims of mismanagement and inadequate due diligence by former executives, resulted in massive losses. Additionally, market volatility and regulatory pressures pushed FTX to the brink of bankruptcy, tarnishing its once-glorious reputation.
