FTX Files Lawsuit Against Sam Bankman-Fried and Former Executives Over $220 Million Embed Acquisition
The legal team representing bankrupt crypto exchange FTX has filed a lawsuit against its former CEO Sam Bankman-Fried, co-founder Zixiao “Gary” Wang, and former engineering director Nishad Singh over the company’s $220 million acquisition of stock-clearing platform Embed.
According to a May 17 court filing, the acquisition — made through FTX’s U.S. subsidiary — was completed with almost no due diligence despite the massive price tag. The filing alleges that FTX insiders used misappropriated customer funds to facilitate the purchase and created misleading records to conceal Alameda Research’s involvement.
A Worthless Investment
Following FTX’s bankruptcy filing in November 2022, Embed was among the assets approved for sale by the court. However, after multiple potential buyers performed their own evaluations, the highest final bid came in at only $1 million — from Embed’s original founder and CEO, Michael Giles.
Initially, 12 entities submitted non-binding indications of interest, with the largest offer reaching $78 million. However, all but one bidder withdrew after conducting deeper due diligence.
FTX lawyers highlighted the massive discrepancy between the original purchase price and the final bid:
“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.”
Allegations of Misused Customer Funds
The lawsuit claims that $157 million of the $220 million purchase price went directly to Michael Giles. FTX’s legal team alleges that Bankman-Fried and his associates knowingly used customer deposits to fund the acquisition while the exchange was already insolvent.
They further assert that deceptive accounting practices were employed to disguise the source of funds, giving the impression that the purchase was financed by FTX executives rather than through Alameda Research.
Seeking Recovery Through Fraud Claims
FTX is asking the court to classify the transactions as avoidable fraudulent transfers and obligations, and to disallow any claims by the defendants until the company can recover the funds lost in the Embed acquisition.
The new management at FTX, led by CEO John J. Ray III, has made asset recovery a top priority, aiming to repay customers and creditors affected by the exchange’s collapse. The team has already pursued several clawback actions targeting former executives, investors, and affiliated entities.
Context and Broader Bankruptcy Proceedings
FTX filed for bankruptcy on November 11, 2022, following a rapid liquidity crisis that exposed severe mismanagement and misuse of customer funds. Since then, investigations have revealed widespread control failures across the company’s operations.
In parallel, Bankman-Fried faces multiple criminal charges, including fraud and conspiracy, while Nishad Singh and Gary Wang have already pleaded guilty to related offenses.
The lawsuit over the Embed acquisition highlights the extent of the financial recklessness under the former leadership, as FTX’s new management continues to unwind the aftermath of one of the largest collapses in crypto history.
FTX is also exploring a potential relaunch of the exchange, although no final decision has been made.
