FTX management is seeking to recover more than $240 million from insiders and executives who profited from FTX’s “wildly inflated” acquisition of stock exchange platform Embed in September.
Cointelegraph reported on May 18 that A lawsuit was filed on May 17 against former FTX CEO Sam Bankman-Fried and other senior FTX officials in connection with the Embed acquisition, which FTX’s new management says was carried out without due diligence. due investigation.
However, Another lawsuit was filed that same day to recover funds from Embed CEO Michael Giles and its shareholders, accusing FTX of paying an “inordinately high” price of $220 million for the stock trading platform..
According to the demand, Embed’s own CTO Laurence Beal was surprised that FTX would pay so much for the company after a brief meeting with Giles. In correspondence with another senior Embed employee, Beal described FTX’s investigative due diligence process with a cowboy emoji.
“I have the feeling that they are [emoji de vaquero] over there.”
As part of the purchase, FTX also paid Embed employees a total of $70 million in retention bonuses. Most of that sum – $55 million – was paid to Giles, who later worried about how he would justify that amount to other employees..
Between the day Giles signed the acquisition agreement, June 10, 2022, and the closing of the acquisition, September 30, 2022, he was paid a staggering $490,000 per day., assuming you worked seven days a week. It also received an additional $103 million when the deal closed, due to its status as Embed’s largest shareholder.
Back at you @Brett_FTX @SBF_FTX @ramnikarora and team. Excited for @Embedded to join @FTX_Official https://t.co/LttYxEFR7L
—Michael Giles (@Harland) June 21, 2022
Cheers @Brett_FTX @SBF_FTX @ramnikarora and team. I’m delighted to have @Embedded join @FTX_Official https://t.co/LttYxEFR7L
This amount contrasts with Giles’ usual salary of $12,500 a month as CEO of Embed..
Although several Embed employees were granted retainer payment agreements, Giles was the only one to have his full retainer premium paid on the closing date. Other employees were required to stay with Embed for two years if they wanted to receive their full premiums.
As a result of these disproportionate payments to Embed employees, FTX will seek to recover $236.8 million from Giles and Embed executives, as well as an additional $6.9 million from Embed’s small shareholders.
Besides, the lawyers accused FTX insiders of “taking advantage of FTX Group’s lack of controls and records to perpetrate massive fraud” by using misallocated funds to facilitate the purchase of Embed, fully aware that FTX it was insolvent when the deal closed.
FTX filed for Chapter 11 Bankruptcy on November 11, 2022. The company’s new management – headed by bankruptcy attorney John Ray III – has focused on recovering funds to repay clients and creditors. More recently, FTX lawyers considered a possible exchange restart..
Cointelegraph has reached out to Embed CEO Michael Giles for comment, but has not received a response by press time.
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