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 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 executives in connection with the Embed acquisition, which, according to FTX’s new management, was done without due diligence. it was done.
However, the same day another lawsuit was filed to recover money from Embed CEO Michael Giles and its shareholders, accusing FTX of paying an “extremely high” price of $220 million for the stock trading platform. .
Lawsuit against Michael Giles, CEO of Embed. Source: Kroll.
According to the lawsuit, Embed’s own CTO, Laurence Beal, was shocked that FTX would pay that much for the company after a brief meeting with Giles. In correspondence with another senior Embed employee, Beal described FTX’s due diligence process with a cowboy emoji.
“I have a feeling they’re [emoji de vaquero] There.”
As part of the purchase, FTX paid Embed employees a total of $70 million in retention bonuses. Most of that amount – $55 million – was paid to Giles, who later worried about how he would justify that amount to other employees.
Between the time Giles signed the acquisition agreement on June 10, 2022, and the expiration of the acquisition on September 30, 2022, he was paid a staggering $490,000 per day, assuming he worked seven days a week. It also received an additional $103 million at the close of the deal due to its position as Embed’s largest shareholder.
Cheers @Brett_FTX @SBF_FTX @ramnikarora and team. I’m glad to have @Embedded join @FTX_Official https://t.co/LttYxEFR7L
This amount is in contrast to Giles’ typical salary of $12,500 per month as Embed’s CEO.
Although many Embed employees were given retainer payment agreements, Giles was the only one who paid his retainer premiums in full 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 recover $236.8 million from Giles and Embed’s officers, as well as an additional $6.9 million from Embed’s minority shareholders.
In addition, the lawyers accused FTX insiders of “exploiting FTX Group’s lack of control and records” by using misappropriated funds to facilitate the purchase of Embed, knowing full well that the deal would close. FTX went bankrupt when it happened.
FTX filed for Chapter 11 bankruptcy on November 11, 2022. The company’s new management – led by bankruptcy attorney John Ray III – focused on recovering funds to repay customers and creditors. More recently, FTX lawyers considered a possible restart of the exchange.
Cointelegraph has reached out to Embed CEO Michael Giles for comment, but has not received a response as of press time.
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