FTX, a cryptocurrency exchange currently in bankruptcy, has recently taken legal action against the former executives of a Swiss company Digital Assets DA AG it once acquired. The lawsuit is an attempt to recover at least $323 million, funds which are intended to repay creditors and reimburse customers.
FTX alleged that it excessively paid for Digital Assets DA AG, a Swiss firm that was later renamed FTX Europe after a series of transactions in 2020 and 2021. The legal action, lodged in the U.S. Bankruptcy Court in Wilmington, Del., asserted that FTX knowingly purchased the Swiss entity despite its limited operations and lack of intellectual property beyond a business blueprint.
The lawsuit targets the co-founders of Digital Assets DA AG and a previous employee and shareholder. FTX accused them of selling a company that had little value and was unlikely to be sold.
FTX had procured the Swiss firm with the intention of liaising with regulators to streamline business activities and broaden its European customer base. However, the lawsuit contended that the firm neither held nor secured the required licenses that would have been advantageous to FTX in Europe.
The lawsuit further claimed that FTX founder Sam Bankman-Fried, among others, disbursed over $376 million in misused company funds to the defendants related to the acquisition. This was allegedly done without any preliminary investigation, price negotiation, or legal counsel engagement until the final hour.
This lawsuit is the most recent in a string of lawsuits filed by FTX’s new management team in a bid to recoup funds to pay back customers and creditors. In May, it initiated legal proceedings against Bankman-Fried and others over the purchase of the stock trading platform Embed.
FTX, along with other firms under Bankman-Fried’s control, had invested more than $5 billion into over 150 startups and venture capital firms in a series of acquisitions. The new management at FTX has been attempting to offload some of these businesses, with some only realizing a fraction of their purchase price.
FTX declared bankruptcy in November following what its new management described as an “unprecedented” loss of control over billions of dollars in cash and cryptocurrency assets. The lawsuit is part of FTX’s ongoing efforts to recover funds and make good on its obligations to creditors and customers.
