FTX is reportedly working to get back the more than $240 million it paid for stock trading platform Embed.
The bankrupt cryptocurrency exchange filed three lawsuits Wednesday (May 17) alleging that former FTX executives did not do proper due diligence before the acquisition of the platform, and that the software was “essentially worthless,” Reuters reported Thursday (May 18).
The three lawsuits target former FTX insiders, Embed executives and Embed shareholders, according to the report.
FTX had planned to use the Embed software to add stock trading to its own platform. It closed on the acquisition six weeks before collapsing into bankruptcy in November 2022, the report said.
Recently, under its new management, FTX tried to sell Embed and found that the highest bid — which came from Embed’s founder, Michael Giles — was only $1 million, per the report.
These lawsuits join one in which two of FTX’s businesses — Alameda Research and FTX US — are suing to recover $6.9 million from Embed, alleging that FTX founder Sam Bankman-Fried and members of his inner circle paid Embed using misappropriate funds.
Bankruptcy law allows courts to wind back “fraudulent transfers,” transfers of a company’s assets to block them from being repaid to creditors.
According to the court filing, the plaintiffs’ attorneys said Bankman-Fried and his associates carried out a series of transactions via Signature Bank to give the impression that the money used to acquire Embed came from their personal accounts and not the company.
In other recent news around FTX, PYMNTS reported May 12 that court filings reveal that the U.S. Department of Treasury and Internal Revenue Service (IRS) have alleged that FTX and its various bankrupt subsidiaries collectively owe around $44 billion to the government in unpaid partnership taxes and payroll taxes.
Four days earlier, on May 8, Bankman-Fried filed court documents asking a federal judge to dismiss 10 of the 13 charges against him.
The FTX founder’s lawyers are seeking to dismiss several wire fraud charges, conspiracy to commit bank fraud charges, and bribery and campaign finance-related charges.
Bankman-Fried has pleaded not guilty to all charges against him, remains free on bail and is set to stand trial in October.
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