Collapsed crypto exchange FTX is now going after executives of its European subsidiary in a bid to recover $323 million. In a lawsuit filed in a US bankruptcy court in Delaware, the exchange claims it overpaid to acquire its European branch while accusing Sam Bankman-Fried and other company Insiders of mismanaging funds from creditors and customers.
The lawyers representing FTX Trading Ltd and Maclaurin Investments Ltd accused Sam Bankman-Fried and his associates of buying Digital Assets AG (DAAG) – a Swiss company that later became FTX’s European branch, for $323 million between 2020 and 2021 despite knowing that DAAG had limited business and no intellectual property beyond a “business plan.”
Now, the cohort is asking for the return of funds transferred to Patrick Gruhn, Robin Matzke, Brandon Williams, and Lorem Ipsum UG, the founders of Digital Assets AG and the current leadership of FTX Europe.
The attorneys asserted that the leadership of FTX Europe was given exorbitant earn-out payments because it was presumed that they could provide access to European authorities, which would enable the exchange to secure the requisite permits for activities within the European Economic Area.
However, only K-DNA Financial Services Ltd, a company that was already authorized to conduct business in the European Economic Area, was bought into FTX Europe for just €2 million.
In April, a Swiss court approved a request by the crypto exchange to sell its European branch. However, it seems according to court filings, current stakeholders have found out that FTX Europe lacks value as an asset and is unable to be sold.
FTT token surges amid bankruptcy proceedings | Source: FTTUSD on Tradingview.com
FTX Trying To Recover
Since filing for bankruptcy in November 2022, the crypto exchange has filed a number of lawsuits in hopes of clawing back money spent by Bankman-Fried and other insiders of the exchange in order to pay some of its investors and customers.
Lawyers filed a similar lawsuit in May against Embed founder Michael Giles and other shareholders. In a similar manner, lawyers asked the court for a return of more than $240 million it paid to acquire Embed, a stock trading platform. According to filings, former FTX insiders did no investigation before buying the platform, which it called worthless and bug-ridden.
FTX was once seen as a leader promoting the mainstream adoption of cryptocurrencies, but the future of its operations still hangs in the balance. There are already rumors that it is working to relaunch its crypto exchange with a rebranding.
According to the Wall Street Journal, the exchange is already in initial discussions with investors. However, the actions of FTX’s leadership have shaken the entire crypto community and damaged relationships built over the years.