FTX chases $244M clawback from ‘wildly inflated’ Embed acquisition deal

FTX’s leadership is seeking to withhold 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 on May 17 against former FTX CEO Sam Bankman-Fried and other top FTX insiders in connection with the Embed acquisition, which it alleges was conducted without due diligence.

However, on the same day, there was a separate trial filed Accusing FTX of paying a “wildly inflated” price of $220 million for the stock-trading platform, Embed’s CEO Michael Giles and its shareholders are demanding the money back.

A lawsuit was filed against Embed Insider and CEO Michael Giles. Source: crawl,

According to the filing, Embed’s own chief technology officer, Lawrence Beale, was stunned that FTX paid so much for the company after a brief meeting with Giles. In correspondence with another senior employee at Embed, Beal described FTX’s due diligence process with a cowboy emoji.

“I understand they (cowboy emoji) are over 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 became concerned about how he would justify the amount to other employees.

Between the day Giles signed the acquisition agreement on June 10, 2022, and the closing of the acquisition on September 30, 2022, he was being paid a staggering $490,000 per day, assuming he worked seven days per week. Work done. He was also awarded an additional $103 million upon completion of the deal, due to his standing as Embed’s largest shareholder.

This amount is in stark contrast to Giles’ typical salary of $12,500 per month as CEO of Embed.

Despite several Embed employees being awarded retention payment agreements, Giles was the only one who was paid his full retention bonus on the closing date. Other employees were forced to stay in Embed for two years if they wanted to receive their full bonus.

As a result of these disproportionate payments to Embed insiders, FTX will now seek to recover $236.8 million from Giles and Embed executives, as well as an additional $6.9 million from Embed’s minority shareholders.

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Additionally, the attorneys accused FTX insiders of “taking advantage of FTX Group’s lack of control and recordkeeping” by misappropriating funds to facilitate the purchase of Embed, while the company was not involved in finalizing the deal. Was bankrupt.

FTX filed for Chapter 11 bankruptcy protection on November 11, 2022. The firms’ new leadership – headed by bankruptcy attorney John Ray III – is focused on getting the money back to repay 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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