The debtors of defunct cryptocurrency exchange FTX have proposed separate litigation in the bankruptcy case over acquiring stock-clearing platform Embed.
In a Dec. 22 filing for United States Bankruptcy Court for the District of Delaware, the FTX debtors said they had reached a proposed settlement with former CEO Sam “SBF” Bankman-Fried “solely with respect to the claims asserted against him in the Embed Proceeding.” The crypto exchange acquired Embed for $220 million through its U.S. arm in June 2022 despite having “performed almost no due diligence,” according to lawyers representing FTX’s leadership.
“The Plaintiffs’ entry into the Agreement is in the best interests of their estates, creditors and stakeholders, and the Agreement should be swiftly consummated,” said the filing. “The Agreement’s terms will recover for the Plaintiffs’ estates 100% of the value conferred by the [simple agreements for future equity] upon Bankman-Fried. Bankman-Fried also relinquishes the right to, and assigns to Plaintiffs, all assets held in accounts in his name at Embed.”
According to the Dec. 22 filing, FTX US issued two simple agreements for future equity to SBF in 2022, requiring the former FTX CEO to pay $160 million for the right to a number of shares in the crypto hedge fund. The resolution proposed that all of the value of FTX US to which SBF may be entitled be returned.
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The proposed agreement would only resolve certain aspects of the bankruptcy case concerning Embed and SBF rather than all the assets the exchange is dealing with as it deals with creditor claims. FTX filed for bankruptcy in November 2022 following the resignation of Bankman-Fried, who has since been convicted of seven felony charges in the United States.
On Dec. 19, FTX debtors said they planned to pool assets with FTX Digital Markets — the firm’s Bahamian arm — as part of efforts to distribute funds to customers. The announcement was the latest effort by debtors to handle company assets and repay creditors under proposed organization plans.
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