Former FTX executives, represented by their lawyers, have sued Sam Bankman-Fried over a $220M deal before the failed exchange's bankruptcy. According to the details of the case, the former CEO of the company Sam Bankman-Fried had made certain deals that were against the company's leadership. After the company had declared bankruptcy, the top bid for one of its assets was just $1 million, representing a 99.5% decline in value.
Therefore, the FTX executives are suing the former company CEO and other personalities that collaborated in making the deal. Sam Bankman-Fried, co-founder Zixiao Wang, and former senior executive Nishad Singh are the three personalities sued over the $220 million acquisition of stock-clearing platform Embed. According to FTX lawyers, Sam Bankman-Fried and his partners didn't do due diligence before making such a deal.
A filing dated May 17th showed Sam Bankman-Fried acquired Embed through its United States subsidiary for about $220 million. FTX lawyers are arguing that Sam Bankman-Fried inability to make cautious decisions and the execution of them contributed to the eventual collapse of the exchange. Apparently, because of the lack of value evaluation from Sam Bankman-Fried and his colleagues, they didn't know that the company they acquired for $220M was worth nothing. During the period FTX filed for bankruptcy, the executives discovered that a company named Embed was worth around $1 million. Apparently, Sam Bankman-Fried and his colleagues had purchased a company that was worth approximately $1 million for $220 million.
"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," FTX lawyers said.
FTX Acquisition Now Worthless
After the bankruptcy of FTX, the judge presiding over the case approved that all the resources and assets of the company be sold. Embed and other assets owned by FTX were put on sale. FTX discovered that Embed was worth around $1 million during the bids submitted. The highest bidder of Embed offered just about $1 million for the company.
Embed’s founder and former CEO, Michael Giles, was the one who made the $1 million bid after initially receiving more than $157 million when Sam Bankman-Fried purchased the platform. FTX lawyers said Michael Giles had "personally received approximately $157 million in connection with the acquisition."
The attorneys also claimed that Sam Bankman-Fried and his partners used the company's situation to make deals that benefited them only. Insiders of FTX, such as Sam Bankman-Fried, were accused of taking "advantage of the FTX Group’s lack of controls and recordkeeping to perpetrate a massive fraud."
Another new development from the FTX collapse case is that Sam Bankman-Fried asks the judge to refund his legal fees. But the judge presiding over the case named John Dorseybhss denied such a claim.
"Mr. Bankman-Fried did not put out any evidence whatsoever as to the balancing of the equities here, what harm is going to occur to him. I don’t know what other insurance policies he has access to, I don’t know what other assets he has access to privately that would allow him to cover these costs and then recover them later under this policy," he said.