The new administration of FTX under John Ray III is investigating a $250 million acquisition made a few months before the cryptocurrency exchange met its downfall.
As it stands, the former Chief Executive Officer (CEO) of FTX Sam Bankman-Fried, the exchange’s co-founder Gary Wang and a former top executive Nishad Singh have been sued for their involvement in the acquisition of stock clearing platform Embed.
Alameda Research Insolvency Know in Advance
The United States Bankruptcy Court for the District of Delaware received two filings from the team that is in charge of the bankruptcy and restructuring process of FTX, its sister trading company Alameda Research and the over 100 companies affiliated with the embattled exchange.
According to the first filing, Bankman-Fried and all of his executives were aware of the poor failing state of Alameda Research before the purchase was made. Therefore, they intentionally redirected customers’ deposits to Alameda to complete the acquisition of the financial technology company
FTX Acquired Embed With Customers’ Assets
Notably, the acquisition of Embed was done last year through the U.S. arm of the cryptocurrency exchange FTX U.S.
At the time, FTX U.S. was in the middle of considering an expansion including the establishment of the FTX Stock product. The FTX U.S. president at the time, Brett Harrison believed that Embed possessed the infrastructure and technology to help the exchange offer this service without a hitch.
The acquisition amount for the license clearing firm was not revealed initially but John Ray III’s administration has now tagged it to be an overpriced purchase.
FTX Team Plans to Recover $250M From Embed
The other lawsuit is targeted at recovering the fund from Embed’s founder and former CEO Michael Giles.
Venture capital firm Propel Venture Partners, UK Chancellor George Osborne’s venture capital vehicle 9Yards, Y Combinator, Bain Capital Ventures, and some other early investors who had sold their stake to SBF would be approached as well.
Embed employees who received retention payments would also be asked for a refund. It is worth noting that all these entities have not been accused of any wrongdoing. The request of the new FTX administration is in agreement with bankruptcy laws which state that fraudulent transfers made to cheat creditors out of their assets can be recalled by the court.