FTX have decided to sue their former CEO, Sam Bankman-Fried, former senior executive Nishad Singh, and the co-founder Zixiao Wang over the $220 million acquisition of Embed, a stock-clearing platform, and they have alleged a lack of due diligence.
According to a filing on 17th May, the company had paid $220 million to acquire the platform through its subsidiary in the United States after it had allegedly performed no due diligence on the platform.
After the company had filed for bankruptcy, the judge that was in charge of the proceedings approved these sales of the platform and various other assets of FTX, but the top bidder for this platform had offered just $1 million. The lawyers of the company stated that the bidders had already decided that the Group and Insiders didn’t bother to assess anything before the Embed acquisition.
FTX Insiders Have Been Sued For Insider Trading
While 12 entities had submitted non-binding indications of interest, there was only one that submitted a final bid after conducting more comprehensive due diligence of FTX- Michael Giles, the founder and former CEO of Embed. According to the company’s lawyers, Giles had received a sum of $157 million in connection with this firm acquisition- but the final bid was just a sum of $1 million- which was subject to reductions during closing. The lawyers also accused the insiders of taking advantage of the Group’s lack of controls, as well as recordkeeping in perpetrating a massive fraud.
The lawyers accused FTX Insiders of misappropriating the funds of the customer to facilitate the purchase of Embed- while being completely aware that the company had gone insolvent after finalizing this deal.
