FTX’s Alameda sues Bankman-Fried, others over pre-bankruptcy deals

By Sarah Lizee

Olympia, Wash., May 18 – FTX Trading Ltd. debtors Alameda Research Ltd., West Realm Shires, Inc., and West Realm Shires Services, Inc. filed a complaint for avoidance and recovery of transfers against former chief executive officer Sam Bankman-Fried, co-founder Nishad Singh and former chief technology officer Zixiao “Gary” Wang, according to documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Delaware.

The debtors are seeking to avoid and recover from the individuals transfers of simple agreements for future equity (SAFEs) dated July 25, 2022 and Sept. 30, 2022, as well as transfers of West Realm Shires common stock on Nov. 14, 2022.

As background, prior to the filing of the Chapter 11 cases, Alameda was a cryptocurrency trading firm owned by Bankman-Fried and Wang. Caroline Ellison was initially co-CEO and later the sole CEO of Alameda.

West Realm is a holding company owned by Bankman-Fried, Singh and Wang, with a number of subsidiaries that did business as FTX.US, the cryptocurrency exchange founded by Bankman-Fried, Singh and Wang to offer cryptocurrency trading services to U.S. customers.

Embed Financial Technologies Inc. is a stock clearing firm and broker-dealer founded by Michael Giles.

On March 15, 2022, West Realm Shires began discussions to acquire Embed, presumably in order to provide FTX.US customers with the ability to trade stocks, in addition to cryptocurrency, on the FTX.US exchange platform. The contemplated product was to be called FTX Stocks.

The debtors said that, through a series of self-dealing transactions orchestrated by Bankman-Fried, Ellison, Singh and Wang, West Realm Shires paid the holders of Embed equity (i.e., shares, options, and SAFEs) $248.01 million of misappropriated FTX group funds to acquire their equity interests in Embed on Sept. 30, 2022, just weeks before the petition date.

As part of the transaction, the FTX insiders caused West Realm Shires to issue SAFEs to Bankman-Fried, Singh and Wang, which by their terms converted into West Realm Shires common stock upon the filing of the Chapter 11 cases, the debtors said.

The debtors claim that all of the above-mentioned transfers and obligations are avoidable. They also seek to disallow all claims filed or held by the defendants in the Chapter 11 cases until they have relinquished to the debtors all property that they received in transfers that are determined by the court to be avoidable.

FTX has headquarters in the Bahamas. The company filed Chapter 11 bankruptcy on Nov. 11, 2022 under case number 22-11068.

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