Court documents filed on May 17, 2023, reveal that current executives overseeing FTX and its subsidiary, Alameda Research, have initiated a lawsuit against Sam Bankman-Fried, the former CEO of FTX, Nishad Singh, FTX’s former director of engineering, and Zixiao “Gary” Wang, co-founder of FTX. The legal action stems from the exchange’s ambitious FTX Stocks project, which was being pursued alongside the acquisition agreement with Embed, a stock clearing service.
Legal Battle Ensues as FTX Executives Accuse Former CEOs of Fraud in Relation to FTX Stocks Venture
Representatives for FTX Limited and the subsidiaries Alameda Research and West Realm Shires (WRS) are suing three former FTX executives over a deal the company now believes is “worthless.” Prior to FTX’s bankruptcy protection filing, Bankman-Fried, Singh, and Wang allegedly purchased a stock clearing firm and FINRA-licensed broker-dealer called Embed. The deal was made so FTX could launch a service called FTX Stocks but the product never became reality.
FTX lawyers say the trio leveraged $248,010,467.02 of misappropriated FTX Group shares to settle the deal. The deal was finalized in “mere weeks” before the Chapter 11 bankruptcy petition date on November 11, 2022. “[Bankman-Fried, Singh, and Wang,] among others, took advantage of the FTX Group’s lack of controls and recordkeeping to perpetrate a massive fraud—lavishly spending the FTX Group’s assets on, among other things, private homes and jets, political and ‘charitable’ contributions, and various investments,” the lawyers said. “The acquisition of Embed was one such transaction.”
Allegedly, the entirety of the financing for the Embed acquisition was sourced from Alameda. Under the guidance of the FTX Insiders (Bankman-Fried, Singh, and Wang), the lawyers insist that Alameda covertly and unlawfully redirected and relocated assets that rightfully belonged to FTX.com, the primary global cryptocurrency exchange managed by the FTX Group, for the purpose of funding the FTX Insiders’ personal endeavors. The alleged misappropriation of funds resulted in the FTX Insiders deceiving FTX.com’s creditors, which encompassed both customers and investors.
The lawusit further claims:
They performed almost no due diligence on Embed and accepted the significant terms proposed by [Michael] Giles, Embed’s founder, CEO, and sole representative during the negotiation, who personally received approximately $157 million in connection with the acquisition. As a consequence, WRS paid far more than fair or reasonably equivalent value for Embed, and awarded Giles an extravagant and unwarranted retention bonus as an incentive to complete the acquisition quickly.
In a bid to expedite the negotiation process, FTX Insiders not only agreed to a hefty price tag of $220 million for Embed but also included a provision in both the April 15, 2022 Memorandum of Terms and the June 10, 2022 Agreement and Plan of Merger that entailed a staggering $55 million retention bonus for the firm’s CEO, representing a quarter of Embed’s alleged value.
Ostensibly, the purpose of this substantial payment was to retain Giles as the CEO until the completion of the acquisition, even though FTX lawyers stress that he held no obligation to continue in that position beyond that point. This peculiar arrangement did not escape the notice of Embed’s remaining shareholders, FTX lawyers disclosed. A representative from Propel Venture Partners, the second-largest shareholder of Embed, allegedly expressed to Giles that he had “ha[d] never seen so much of a deal this size go to a founder … just unusual proportions.”
What are your thoughts on the allegations against the former FTX CEOs and the failed FTX Stocks project? Share your opinions in the comments section below.
You can get bonuses upto $100 FREE BONUS when you:
💰 Install these recommended apps:
💲 SocialGood - 100% Crypto Back on Everyday Shopping
💲 xPortal - The DeFi For The Next Billion
💲 CryptoTab Browser - Lightweight, fast, and ready to mine!
💰 Register on these recommended exchanges:
🟡 Binance🟡 Bitfinex🟡 Bitmart🟡 Bittrex🟡 Bitget
🟡 CoinEx🟡 Crypto.com🟡 Gate.io🟡 Huobi🟡 Kucoin.
Comments