FTX management is looking to recover more than $240 million from insiders and executives who benefited from FTX’s “wildly inflated” acquisition of stock-clearing platform Embed in September.
Cointelegraph reported yesterday that a lawsuit was filed against former FTX CEO Sam Bankman-Fried and other top FTX insiders on May 17 regarding the Embed acquisition, which they say was made without enough hard work.
However, on the same day, a separate lawsuit was filed seeking to recover funds from Embed CEO Michael Giles and its shareholders, accusing FTX of paying a “wildly inflated ” price of $ 220 million for the stock trading platform.
According to the filing, Embed’s own Chief Technology Officer Laurence Beal was surprised that FTX was paying so much for the company after a brief meeting with Giles. In a letter to another senior Embed employee, Beal described FTX’s hard work process using a cowboy emoji.
“I understand that they are [cowboy emoji] there.”
As part of the purchase, FTX also paid Embed employees a total of $70 million in retention bonuses. The bulk of that amount — $55 million — was paid to Giles, who later worried about how he would justify this amount to other employees.
Between the day Giles signed the acquisition agreement on June 10, 2022, and the acquisition closed on September 30, 2022, he was paid $490,000 per day, assuming he worked seven days per week. He was also awarded an additional $103 million when the deal closed, due to his standing as Embed’s largest shareholder.
– Michael Giles (@Harland) June 21, 2022
This amount is in stark contrast to Giles’ normal salary of $12,500 per month as Embed’s CEO.
Despite a number of Embed employees being awarded retention payment agreements, only Giles was paid his full retention bonus on the closing date. Some employees are obligated to stay with Embed for two years if they want to receive their full bonuses.
As a result of these disproportionate payments to Embed insiders, FTX will now seek to obtain $236.8 million from Giles and Embed executives as well as an additional $6.9 million from small Embed shareholders.
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Additionally, the attorneys accused FTX insiders of “exploiting FTX Group’s lack of controls and record-keeping to commit a massive fraud” by using false funds to facilitate the purchase of Embed. , while fully aware that the company will not be paid to end the deal.
FTX filed for Chapter 11 bankruptcy protection on Nov. 11, 2022. The company’s new leadership — led by bankruptcy attorney John Ray III — is focused on clawing back funds to pay customers and creditors. Recently, FTX lawyers considered a possible reboot of the exchange.
Cointelegraph reached out to Embed CEO Michael Giles for comment but did not receive a response by the time of publication.
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