Bankrupt cryptocurrency entities FTX, FTX.US, and Alameda Research have filed a lawsuit against former executives Sam Bankman-Fried (SBF), Nishad Singh, and Gary Wang for lavishly spending FTX Group’s assets on the acquisition of stock clearing firm Embed Financial Technologies.

The move is the first formal action from FTX CEO John Ray against the company’s former management. The lawsuit, filed in the United States Bankruptcy Court for the District of Delaware, seeks to claw back the funds spent during the acquisition.

FTX Sues SBF and His Inner Circle

According to the court document, the plaintiffs accused the former management of taking advantage of FTX Group’s lack of controls and recordkeeping to inflate the valuation of Embed and deliberately purchasing the platform for more than it was worth.

The defendants, addressed as FTX Insiders, performed little to no due diligence on Embed, as they prioritized speed above everything else in the transaction. They accepted all the terms proposed during the negotiation by Michael Giles, Embed’s founder and CEO, who was also the sole representative.

Giles walked away from the deal with roughly $157 million and an “extravagant and unwarranted retention bonus” as an incentive to quickly complete the sale.

FTX began the acquisition negotiation with Giles at the end of March 2022. By mid-April of the same year, the parties had signed the “Memorandum of Terms,” which ascribed a $220 million enterprise value to Embed with a $75 million retention bonus to the platform’s employees, including $55 million to Giles.

However, when the deal was finalized in September – a few weeks before FTX Group went bankrupt – the FTX Insiders spent more than $248 million to acquire Embed. The plaintiffs allege that while the deal took about six months, the essential terms were negotiated and agreed upon within two weeks.

FTX Seeks to Recover $250M

Furthermore, the plaintiffs accused SBF, Singh, and Wang of causing the bankrupt entity