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FTX Bankruptcy Case: Lawyers Seek $323.5 Million Recovery from FTX Europe Leadership

Ruholamin Haqshanas
Last updated: | 2 min read
Image Source: Adobestock

FTX lawyers have filed a court motion seeking the recovery of $323.5 million from the leadership of FTX Europe, which includes Patrick GruhnRobin MatzkeBrandon Williams, and Lorem Ipsum UG.  

According to court filings submitted on Wednesday, the lawyers allege that the FTX Europe leadership improperly used funds from the crypto exchange to acquire Swiss company DAAG without conducting any due diligence. 

The lawyers also claim that the leaders were aware that DAAG had limited business and no intellectual property beyond a business plan.

FTX Group, led by Sam Bankman-Fried, paid approximately $323.5 million for the acquisition of DAAG, which was later rebranded as FTX Europe. 

The motive behind the acquisition was to gain access to European regulators in order to obtain licenses for conducting activities in the European Economic Area.

“The FTX Insiders pursued the DAAG acquisition because they believed DAAG’s founders could provide access to European regulators that would allow FTX to obtain the necessary licenses for activities in the European Economic Area,” the FTX lawyers said.

FTX Europe Leadership Received Excessive Bonus Payments

The lawyers also claim that the FTX Europe leadership received excessive earn-out payments and bonuses amounting to approximately $100 million in connection with the acquisition of Cyprus-based investment firm K-DNA

This acquisition was completed for a mere 2 million euros. 

The lawyers argue that the earn-out payments were unwarranted as K-DNA was already licensed to operate in the European Economic Area and was later absorbed into FTX Europe.

Furthermore, the lawyers have requested the court to halt any further payments to the FTX Europe leadership. 

According to the court filings, there is still an outstanding balance of $52.5 million. 

However, the lawyers argued that FTX Europe lacks value as an asset and is not viable for sale.

It is worth noting that last month, FTX debtors revealed that the exchange has made “substantial progress” in securing assets, recovering as much as $7 billion in liquid assets so far

The exchange owed customers approximately $8.7 billion when it went bankrupt last year. 

More specifically, FTX had $6.4 billion in deficit, which was in the form of fiat currency and stablecoin that had been misappropriated.

Meanwhile, the company has been seeking to retrieve every bit of money it can.

For one, FTX has filed a complaint in Wilmington, Delaware, bankruptcy court, asking back the $700 million its founder Sam Bankman-Fried transferred to K5 entities in 2022.

As per the latest development in the FTX saga, federal prosecutors in Manhattan are probing former executive Ryan Salame and his girlfriend Michelle Bond, a former congressional candidate, for potential violations of campaign-finance law

The officials are investigating whether the couple unlawfully evaded federal limits on campaign contributions during Bond’s 2022 campaign for the Republican primary in New York’s 1st congressional district, according to a report by the Wall Street Journal