As per the court records, the current executives in charge of FTX and its subsidiary, Alameda Research, have filed a lawsuit against the former CEO of FTX, Sam Bankman-Fried, the former director of engineering at the crypto exchange platform, Nishad Singh, and the company’s co-founder, Zixiao “Gary” Wang.
The FTX Stocks project, which the exchange apparently pursued simultaneously with the acquisition deal with Embed, a stock clearing provider, was the basis for the aforementioned legal action.
The Accusation of FTX
Three former executives are being sued by FTX Limited, its subsidiaries, Alameda Research, and West Realm Shires for an agreement the business once had but now views as “worthless.”
According to court documents, Bankman-Fried, Singh, and Wang reportedly bought Embed, a stock clearing company and broker-dealer with a FINRA license, before FTX filed for bankruptcy protection. The purpose of the aforementioned agreement was to pressure the crypto exchange platform to introduce a service called FTX Stocks, however, the intended outcome never materialized.
Additionally, the said leveraged $248,010,467.02 of stolen Group shares to close the acquisition, according to the crypto exchange platform’s lawyers. Furthermore, it was purportedly completed “mere weeks” prior to the Chapter 11 bankruptcy petition deadline of November 11, 2022, for the contentious agreement.
The lawyers added that “Bankman-Fried, Singh, and Wang, among others, used the Group’s lax controls and recordkeeping to perpetrate a massive fraud—lavishly spending the Group’s assets on, among other things, private homes and jets, political and “charitable” contributions, and various investments.”
Embed’s contentious acquisition was described as “one such transaction.” Additionally, it has been claimed that Alameda provided all of the funding for the purchase of Embed. Additionally, lawyers claim that Alameda secretly and illegally moved money that rightly belonged to FTX.com in order to finance the three FTX insiders’ personal undertakings under the direction of the three crypto exchange platform insiders. In which the FTX Insiders allegedly defrauded FTX.com’s creditors, who included both consumers and investors, as a result of the alleged theft of cash.
It has also been reported that in an effort to speed up the negotiation process, the aforementioned FTX Insiders included a clause in both the April 15, 2022, Memorandum of Terms and the June 10, 2022 Agreement and Plan of Merger that required the company’s CEO to receive a staggering $55 million retention bonus, equal to one-fourth of Embed’s alleged value.
Additionally, it has been claimed that the stated hefty payment served the objective of keeping Giles as CEO up until the conclusion of the acquisition. The crypto exchange platform’s attorneys emphasize that he was under no obligation to hold that post after that, though.
Furthermore, the crypto exchange platform’s lawyers have revealed that the remaining stockholders of Embed were aware of this odd arrangement. However, a representative from Propel Venture Partners, Embed’s second-largest stockholder, allegedly told Giles that he “had never seen so much of a deal this size go to a founder… just unusual proportions.”