FTX files $1.8 billion lawsuit against Binance and its ex-CEO
What's the story
FTX, the now-defunct cryptocurrency firm, has sued Binance and its former CEO Changpeng Zhao. The lawsuit demands $1.8 billion in damages for an alleged fraudulent transfer of funds from FTX to Binance and its executives. The dispute revolves around Binance selling its stake in FTX back to the company in July 2021, a deal that included tokens worth $1.76 billion at the time.
Legal claims
Firm alleges fraudulent transfer
The lawsuit alleges that Alameda Research, a division of FTX, funded the share repurchase using tokens. However, it claims that Alameda was insolvent at the time and could not afford this transaction. The deal involved Binance selling back its 20% stake in FTX's international unit and 18.4% in its US-based entity, which were purchased using a combination of FTX and Binance-branded cryptocurrencies.
Recovery efforts
FTX seeks recovery of funds for creditors
The lawsuit seeks to recover at least $1.76 billion that was reportedly fraudulently transferred to Binance and its executives, for the benefit of FTX's creditors. Along with this amount, the plaintiffs are also seeking compensatory and punitive damages, the exact amounts of which will be determined at trial. This was revealed in a filing in Delaware, US by administrators for the FTX estate.
Accusations
Ex-Binance CEO accused of damaging tweets
The lawsuit also alleges that Zhao posted a series of "false, misleading, and fraudulent tweets" just before FTX's collapse. These tweets were purportedly aimed at damaging his competitor. On November 6, 2022, Zhao had tweeted that Binance planned to liquidate $529 million worth of FTX tokens. This announcement, according to the FTX estate, triggered a massive wave of withdrawals that led to the crypto exchange's downfall.
Defense
Binance dismisses claims as meritless
Responding to the lawsuit, a spokesperson for Binance has called the claims baseless. The company has promised to defend itself vigorously against the allegations. Attempts to contact Zhao, who is also known by his initials "CZ," for comment have so far been unsuccessful.
Company collapse
FTX's downfall and ongoing legal battles
FTX was among the world's largest cryptocurrency firms before its fall in late 2022. In November 2022, Binance—then led by Zhao—had initially planned to acquire FTX's non-US unit as it struggled financially but later withdrew its offer. The founder of FTX, Sam Bankman-Fried, was sentenced to 25 years in prison for stealing $8 billion from customers in March this year. He has appealed against the conviction.