Two of FTX’s businesses are suing to recover $6.9 million from Embed Financial.
Alameda Research (FTX’s former sister trading firm) and FTX US (aka West Realm Shires), alleged in a court filing Wednesday (May 17) that FTX founder Sam Bankman-Fried and members of his inner circle paid Embed — a broker-dealer acquired by Bankman-Fried — using misappropriated funds.
According to court papers, the plaintiffs want to use bankruptcy laws to reclaim money paid to Embed’s shareholders, which include Bain Capital, Y Combinator and 9Yards, a venture capital operation run by the former British chancellor.
Bankruptcy law allows courts to wind back “fraudulent transfers,” transfers of a company’s assets to block them from being repaid to creditors.
Read more: FTX Founder Will Testify Before Congress
According to the court filing, the plaintiffs’ attorneys said Bankman-Fried and his associates carried out a series of transactions via Signature Bank to give the impression that the $220 million used to acquire Embed came from their personal accounts and not the company.
The complaint alleged that Embed was worth just a fraction of what Bankman-Fried’s group paid for it, quoting from an internal memo before the deal in which Embed employees worried that FTX would notice technical flaws that could ruin plans to add 10,000 users to FTX’s planned stocks product.
“[The Embed platform] can’t really take ANY accounts,” one employee wrote, per the complaint.
Bankman-Fried, 31, faces multiple counts of fraud in connection with the collapse and bankruptcy of his firm. He has pleaded not guilty and asked a judge this month to dismiss a bulk of the charges against him.
This latest court action comes days after the U.S. Department of Treasury and IRS alleged in court that FTX and its various bankrupt subsidiaries owe roughly $44 billion to the government in unpaid partnership taxes and payroll taxes.
The 45 separate claims being directed at the remains of what was once the world’s third-largest cryptocurrency exchange range from just a few thousand dollars to tens of billions.
The largest claim is one being leveled at Alameda Research, which is also the subject of a separate liability for $7.9 billion.
