Former FTX executives Sam Bankman-Fried, Gary Wang and Nishad Singh are being sued for wasting $220 million in client funds on a dodgy acquisition of a company called Embed. The acquisition was reportedly completed when Alameda Research, the investment fund involved, was already completely insolvent.
$220 million stolen from FTX customers for wind
New reversal in the FTX file, and not the least: Sam Bankman-Fried, Gary Wang and Nishad Singhthe main leaders of the exchange, are being sued by the new management chaired by John Ray III regarding the waste of $220 million – from client funds – in connection with a dubious acquisition.
According to the complaint filed in the Delaware bankruptcy court (the one overseeing the FTX file) on May 17, the leaders we are talking about would have given their approval for Alameda Research, the investment fund managed by Caroline Ellison, invests $220 million in a company called Embed alongside West Realm Shiresa subsidiary of FTX.
Only, this acquisition would have been finalized last September, when Alameda Research was already insolvent, which the leaders of the empire of Sam Bankman-Fried were not unaware of. So, the latter would have knowingly taken funds from FTX – and therefore to the customers of the exchange – in order to finance the transaction.
Moreover, the amount necessary for this acquisition would have been very largely overestimated. According to the court document, Embed held just $37 million in assets and made just $25,000 in profit as of March 31, 2022.
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No due diligence, and falsified documents
According to current FTX attorneys, exchange executives allegedly made up transactions between the companies so that the source of the funds is concealed, but also in order to protect themselves. Which, of course, directly incriminates them and proves that they were fully aware of the situation.
FTX lawyers hope to recover $55 million paid to former Embed CEO as part of a rather vague retention bonus since it did not require him to stay with the company after the deal was finalized. In addition to this amount, the CEO also reportedly got $100 million just for his stake as the company’s largest shareholder.
In addition, according to various documents and internal conversations, no due diligence process was carried out by FTX teams. to study if Embed was a reliable investment and if its foundations were solid.
We also learn that a procedure for the resale of Embed would have been carried out at the beginning of the year 2023, with the only takeover offer being that of its own former CEO, who offered $1 million for the purpose. A derisory sum, compared to the amount invested by the former management of FTX, which will therefore ultimately have been absolutely useless.
“The outcome of the bidding process – including Mr. Giles’ $1 million bid [le PDG d’Embed, NDLR] , or 0.45% of the purchase price paid by WRS a few months earlier – leaves no doubt that the $220 million paid by WRS to acquire Embed was grossly inflated compared to the fair value of the business, which Mr. Giles knew full well. »
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