HomeCryptoFTX sues founder Sam Bankman-Fried

FTX sues founder Sam Bankman-Fried

A twist in the story surrounding the bankruptcy of US crypto exchange FTX. 

According to an official document filed in a Delaware court the day before yesterday, the company’s lawyers have sued co-founder and former CEO Sam Bankman-Fried over the acquisition of stock clearing platform Embed.

SBF’s role in FTX 

FTX was founded in 2019 by Sam Bankman-Fried and Gary Wang, and SBF has always been its CEO. 

Since the company went into bankruptcy and filed for Chapter 11, SBF has had to step down and leave the company in the hands of the bankruptcy trustee, John J. Ray III. 

As a result, SBF now has no power within the company it founded, although it is still effectively one of the largest shareholders. 

The fact is that the former CEO is suspected of having a serious responsibility for the causes of the company’s bankruptcy, so it is not surprising that the new staff, who are managing the current delicate phase, are taking it out on him in particular.

The Embed case

The issue raised by FTX’s lawyers relates to the company’s acquisition of Embed in June 2022. 

It should be noted that this acquisition took place after the implosion of the Earth/Moon ecosystem, which had already caused major problems for FTX, and only a few months before bankruptcy. 

FTX US’s acquisition of Embed Financial Technologies Inc. was intended to bring its subsidiary Embed Clearing LLC, a new clearing firm that was a member of FINRA, DTC, NSCC, Nasdaq and IEX, into the group. 

The purpose of this acquisition was to enable FTX to provide white label brokerage services to other companies, applications and users of FTX Stocks. 

However, the problem only arose this year when Embed was listed by the liquidator as one of FTX’s assets to be sold to raise cash.

The sale of Embed

After the judge approved the sale of the Embed platform, 12 potential buyers came forward. These submitted their non-binding expressions of interest, including a $78 million bid. 

The fact is that these non-binding offers were based on information provided by FTX itself, but when the potential buyers were able to examine the actual data on the platform and get their own information, they discovered that its real value was almost non-existent. 

And so almost all of them withdrew their bids, except for a single potential buyer who made a final bid of one million. This single remaining potential buyer was the former CEO of Embed, Michael Giles.

FTX’s allegations against SBF

At this point, FTX’s lawyers sued the company’s former CEO, Sam Bankman-Fried, accusing him of failing to carry out due diligence before buying Embed. 

Moreover, the purchase of the platform in 2022 was made at a cost of USD 220 million. 

If even the non-binding preliminary offer of $78 million represented a clear error of judgement on the part of SBF at the time of purchase, the only offer that survived due diligence, for $1 million, highlights the very serious error made by SBF. 

Moreover, as it was made by the previous owner, it smacks of mockery. 

FTX’s lawyers claim:

“The bidders had figured out what the FTX Group and FTX Insiders did not bother to assess prior to the Embed acquisition, namely, that Embed’s vaunted software platform was essentially worthless”.

At this point, one wonders why SBF wanted to give $220 million to the former owners of Embed. 

According to FTX’s lawyers, FTX insiders defrauded investors, creditors and customers. They also claim that Giles himself received some $157 million from the acquisition, only to be offered a mere $1 million to buy it back less than a year later. 

The future of Sam Bankman-Fried 

There are now so many charges hanging over the head of FTX’s co-founder that it seems very difficult for him to avoid a heavy sentence. 

Moreover, the court has a great deal of information at its disposal, often very well documented, to try to fully understand SBF’s responsibility in this affair. 

Nevertheless, the former CEO continues to proclaim his innocence from his forced confinement at his parents’ home in California. 

The more one delves into this matter, the more the very poor management skills of the former FTX boss become apparent, who can hardly be blamed for his failure.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".
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