Bankrupt crypto exchange FTX is seeking to claw back more than $240 million it paid for stock trading platform Embed. FTX alleges that former FTX insiders, including indicted founder Sam Bankman-Fried, misappropriated company funds to acquire stakes in Embed as part of the transaction. The crypto exchange closed on the Embed acquisition just six weeks before it collapsed into bankruptcy in November.
FTX’s new management has been seeking to recover assets to repay customers since the bankruptcy filing. U.S. law allows debtors to claw back payments made under certain circumstances shortly before a bankruptcy filing and use those funds to repay other creditors. FTX recently tried to sell Embed, but the highest bidder was Embed founder Michael Giles, who offered only $1 million.
FTX is now seeking to recover $236.8 million from Giles and Embed insiders, and $6.9 million from Embed minority shareholders. The crypto exchange claims that the $220 million it spent to acquire Embed was “wildly inflated relative to the company’s fair value,” and that Embed’s software was “essentially worthless.” FTX also paid Embed employees $70 million in retention bonuses, most of which went to Giles.
FTX’s lawsuits leave no doubt that the crypto exchange was taken advantage of in the Embed acquisition. The company is now seeking to recover the funds to repay customers and other creditors.