Insiders and executives of Embed are being sued by FTX attorneys for $243.7 million, according to their claims that the company's previous administration paid a wildly inflated cost for it.
The management of FTX is attempting to recover more than $240 million from executives and insiders who benefitted from FTX's wildly inflated purchase of stock-clearing service Embed in September. According to yesterday's Cointelegraph story, a lawsuit was brought on May 17 versus previous FTX CEO Sam Bankman-Fried along with several key FTX employees over the alleged lack of due diligence in the Embed transaction.
On the other hand, another complaint was filed on the same day, accusing FTX of paying a wildly inflated cost of $220 million to acquire the stock-trading system and attempting to recover money from Embed's CEO Michael Giles and its stockholders. After only a brief discussion with Giles, Laurence Beal, the chief technology officer of Embed, reportedly expressed surprise that FTX paid such a high price for the business. Beal used a cowboy emoji to depict FTX's due diligence procedure in a message to a senior employee at Embed.
Employee retention bonuses of $70 million were also given to Embed workers by FTX as part of the acquisition. Giles received almost all of that money ($55 million), which subsequently caused him to worry about how he could clarify it to other workers. Giles received an incredible $490,000 every day, presuming he worked seven days per week, from the day he signed the purchase contract on June 10, 2022, until the acquisition closed on September 30, 2022. As Embed's largest shareholder, he was also given an extra $103 million after the acquisition was finalized.
Tweet by Michael Giles
This sum is far lower than Giles' regular monthly income as CEO of Embed, which is $12,500. Giles was the only Embed employee to get his whole retention incentive on the closing date, despite several others receiving retention payment agreements. To be eligible for their full incentives, the other workers had to work at Embed for two years. FTX will now try to recoup $236.8 million through Giles and Embed managers, as well as an extra $6.9 million from Embed's smaller shareholders as a result of these excessive distributions to Embed insiders.
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