FTX Strikes $33 Million Deal to Resolve Dispute Over European Venture

FTX Bankruptcy Case
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The bankrupt crypto exchange FTX has reached a $33 million settlement regarding its contentious European expansion effort. This resolution comes after FTX sought to recover $323 million spent on acquiring a European startup, a venture that has now concluded with the company being sold back to its original founders for $32.7 million. The heart of this dispute lay in FTX‘s 2021 acquisition of Digital Assets DA AG, a Zurich-based company that was rebranded as FTX Europe.

FTX had initiated legal action against the founders of Digital Assets DA AG, alleging that the purchase price constituted a “massive overpayment” with funds that belonged to FTX customers. At the time of its acquisition, FTX Europe was characterized as an entity with little more than a business plan, lacking operational status.

Documents filed in the Wilmington, Delaware bankruptcy court reveal FTX‘s determination that selling the fledgling subsidiary back to its founders was the most viable option, considering no other buyers were interested. This decision was framed as the optimal route forward for FTX‘s creditors.

The lawsuit became further complicated with counterclaims from the defendants, Patrick Gruhn and Robin Matzke, who sought $256.6 million from FTX, denying the allegations leveled against them. Amidst these legal battles, FTX highlighted the potential cost and complexity of continuing litigation, especially given that critical witnesses like FTX founder Sam Bankman-Fried (SBF), now convicted of fraud, would be unavailable for testimony.

Robin Matzke commented on the settlement, noting the positive trajectory of FTX‘s European operations before the global failure of FTX in November 2022. He expressed satisfaction with the settlement, emphasizing the importance of facilitating swift payments to European clients affected by the exchange’s collapse.

This settlement is part of a broader effort by FTX to recover funds through various lawsuits, including actions against former legal advisors, the founders of the trading platform Embed, other bankrupt crypto entities, and K5, an investment firm known for its political and celebrity connections.

The case, marked as FTX Trading Ltd v. Lorem Ipsum UG et al in the U.S. Bankruptcy Court for the District of Delaware (No. 23-ap-50437), represents a pivotal moment for FTX as it navigates through bankruptcy proceedings. Legal representation for FTX in this matter is provided by Steven Holley, Stephen Ehrenberg, Brian Glueckstein, and Christopher Dunne of Sullivan & Cromwell LLP, indicating the high stakes and complex nature of this legal endeavor.

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