FTX is suing its former CEO Sam Bankman-Fried, co-founder Zixiao Wang, and former senior executive Nishad Singh over the $220 million acquisition of stock-clearing platform Embed.
FTX lawyers are accusing Bankman-Fried, Wang, and Singh of inking the deal without proper due diligence.
After FTX filed for bankruptcy, the judge in charge of the proceedings approved the sales of Embed and other assets of FTX, but the top bidder for the platform offered just $1 million.
While 12 entities had submitted non-binding indications of interest — the largest of which was $78 million — all but one declined to submit a final bid after conducting more comprehensive due diligence: Embed’s founder and former CEO, Michael Giles.
The lawyers also accused the FTX bosses of taking “advantage of the FTX Group’s lack of controls and recordkeeping to perpetrate a massive fraud.”
The lawyers accused the trio of using misappropriated customer funds to facilitate the purchase of Embed, while fully aware that the company was insolvent when finalizing the deal.
FTX filed for bankruptcy on November 11, 2022, and since then, its new leadership has been focused on clawing back funds to repay customers and creditors.