FTX Moves to Claw Back $240 Million from Insiders Over Inflated Embed Deal
FTX’s restructuring team is pursuing legal action to recover more than $240 million from former executives and insiders linked to its controversial 2022 acquisition of Embed, a stock-clearing platform the company allegedly purchased at an “inflated” valuation.
Court filings from May 17 reveal that lawsuits have been filed against both FTX insiders, including former CEO Sam Bankman-Fried, and Embed executives, led by CEO Michael Giles. The suits claim that the acquisition was completed with minimal due diligence and grossly overpaid given the platform’s true value.
Allegations of Negligence and Overpayment
FTX reportedly spent $220 million to acquire Embed, along with an additional $70 million in employee retention bonuses. Of that total, $55 million was awarded to Giles personally — an amount described in the filing as “wildly disproportionate.”
During the acquisition, Embed’s own chief technology officer, Laurence Beal, expressed disbelief at FTX’s valuation, jokingly referring to FTX’s due diligence process with a cowboy emoji in internal messages.
Court documents show that Giles earned the equivalent of $490,000 per day between June and September 2022 — far exceeding his regular $12,500 monthly salary. When the deal closed, he received an additional $103 million as Embed’s largest shareholder.
The lawsuit further alleges that while many Embed employees were promised retention bonuses, Giles was the only one who received his full payment immediately after the deal closed. Others were required to remain with the company for two years to receive the same.
Legal Claims and Recovery Efforts
FTX’s new leadership is now seeking to reclaim $236.8 million from Giles and other Embed executives, as well as $6.9 million from smaller shareholders.
The complaint also accuses FTX insiders of exploiting the company’s poor internal controls and lack of oversight to carry out “a massive fraud.” Lawyers allege that funds used for the acquisition were misallocated from customer deposits, despite FTX’s insolvency at the time.
Background and Ongoing Bankruptcy Process
FTX filed for Chapter 11 bankruptcy protection in November 2022. Under current CEO and restructuring expert John Ray III, the company has prioritized asset recovery to repay creditors and customers affected by the collapse.
Ray’s team has since filed multiple lawsuits targeting former FTX executives, celebrity endorsers, and third-party firms that profited from the exchange’s pre-collapse activities. In recent months, the company’s lawyers have also explored the possibility of relaunching the exchange under new management.
Looking Ahead
The Embed case adds to FTX’s growing list of legal disputes aimed at recovering funds lost through mismanagement and fraud. If successful, it could mark a significant step toward restoring a portion of the billions owed to FTX customers.
However, legal experts suggest that even successful clawbacks could take months or years to fully resolve, given the complexity of international asset tracing and bankruptcy proceedings.
