FTX's leadership hopes to recover more than $240 million from insiders and executives who benefited from FTX's “crazy inflation” acquisition of stock clearing platform Embed in September.
Cointelegraph reported on May 18 that former FTX CEO Sam Bankman-Fried and other top FTX insiders filed a lawsuit on May 17 over the Embed acquisition, which FTX's new leadership claims did not carry out sufficient due diligence . ever, another The lawsuit was filed seeking to recover funds from Embed CEO Michael Giles and his shareholders, alleging that FTX paid an "inflated" price of $220 million for the stock trading platform. According to the filing, Embed's own chief technology officer, Laurence Beal, was app alled that FTX was paying such a high price for the company after a brief meeting with Giles. In a correspondence with another senior Embed employee, Bill used a cowboy emoji to describe FTX's due diligence process.
FTX also paid Embed employees a total of $70 million in retention bonuses as part of the acquisition. The bulk of that sum $55 million went to Giles, who later became concerned about how he would justify the money to other employees.
From the time Giles signs the acquisition agreement on June 10, 2022 until the acquisition closes on September 30, 2022, he is paid a staggering $490,000 per day, assuming he works 7 days a week. He also pocketed an addition al $103 million when the deal closed, as he was Embed's largest shareholder. That amount stands in stark contrast to Giles' regular monthly salary of $12,500 as CEO of Embed.
While many Embed employees received retention payment agreements, Giles was the only one to receive the full retention bonus by the deadline. Other employees must work at Embed for two years if they wish to receive their full bonus.
As a result of these disproportionate payments to Embed insiders, FTX will now seek to recover $236.8 million from Giles and Embed executives, and $6.9 million from Embed minority shareholders. In addition, the attorneys allege that FTX insiders used misallocated funds to face ilitate the acquisition of Embed, took advantage of "FTX Group's lack of control and record keeping, and committed massive fraud" while closing the deal fully aware that FTX was insolvent.
FTX filed for Chapter 11 bankruptcy protection on November 11, 2022. The firm's new leadership led by bankruptcy attorney John Ray III has been focused on recovering funds to pay clients and creditors. Recently, FTX lawyers considered the possibility of restarting the exchange.
