Bankrupt crypto exchange FTX sued Sam Bankman-Fried (SBF) and other former executives of the company for the $250 million acquisition of stock clearing platform Embed.

According to a May 17 court filing, SBF and other executives — Nishad Singh and Gary Wonder — knew Alameda Research was insolvent and still went ahead with the deal. Besides that, the lawsuit alleged that the deal was significantly overpriced.

FTX liquidators filed the suit in the U.S. Bankruptcy Court for the District of Delaware. Part of their claims is that SBF and his fellow executives deliberately took FTX customers’ funds to complete the acquisition on behalf of Alameda.

Meanwhile, FTX has also filed lawsuits against Embed co-founder Michael Giles and other early investors, including venture capital firm Propel Ventures Partners. This lawsuit aims to claw back funds from what FTX liquidators describe as a bad deal.

The lawsuit alleges that the former FTX leadership made a terrible deal, and there was a complete lack of due diligence. Backing up these allegations are internal messages that the platform cannot “handle approximately 600 new user accounts” even though the release plan specified 10,000.

The court filing claims that as of March 31, 2022, Embed had assets worth $37 million and made profits of $25,000.

Yet, FTX leadership under SBF paid not only for shareholders’ equity but also gave a $55 million retention bonus to Embed co-founder and CEO at the time. The bonus did not require that he remain at the company.

“WRS paid far more than fair or reasonably equivalent value for Embed, and awarded Giles an extravagant and unwarranted retention bonus as an incentive to complete the acquisition quickly.”

Besides, attempts to sell the fintech platform showed that no investor would pay more than $1 million for the company. The filing revealed that its co-founder Giles was the only investor willing to pay that amount.

“Of the eleven other potential bidders, only one submitted a final bid after conducting more comprehensive due diligence, for a mere $250,000, and only for Embed’s assets; the Debtors would have been left responsible for all of Embed’s liabilities.”

While the lawsuit brings new revelations about FTX, it generally showed the company’s poor practices and lack of due diligence when SBF was in charge.

The lawyers claim that SBF paid way over value for the company. Since liquidators took over FTX, attempts to sell Embed has not been successful since no one wanted to spend as much for it.

“They performed almost no due diligence on Embed and accepted the significant terms proposed by Giles, Embed’s founder, CEO, and sole representative during the negotiation, who personally received approximately $157 million in connection with the acquisition.”

The post FTX sues SBF, others over ‘worthless’ fintech company acquisition appeared first on CryptoSlate.

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