FTX Hits Binance, Former CEO Zhao With $1.8B Lawsuit

According to Bloomberg, the FTX bankruptcy estate has filed a lawsuit against cryptocurrency exchange Binance and its former CEO, Changpeng Zhao, seeking to recover $1.8 billion.

The lawsuit, initiated on November 10, comes as FTX continues its efforts to reclaim funds amid its bankruptcy proceedings. The firm alleges that a 2021 deal involving Zhao and other Binance executives resulted in a fraudulent transfer of nearly $1.76 billion worth of cryptocurrency from FTX.

Background on the Share Repurchase Deal

The lawsuit came as a result of a transaction dating back to July 2021, when FTX co-founder Sam Bankman-Fried struck a deal with Binance to buy back stakes in both FTX’s international unit and its U.S.-based entity, West Realm Shires Services.

In exchange, Bankman-Fried provided FTX’s proprietary FTT tokens and Binance’s BNB and BUSD tokens, a deal valued at approximately $1.76 billion at the time. The transaction allowed Binance to offload a 20% stake in FTX’s international operations and an 18.4% stake in FTX US.

In the complaint, the estate contends that the share repurchase agreement constituted a fraudulent transfer, as FTX and its affiliated trading platform, Alameda Research, were allegedly insolvent at the time.

Binance has yet to issue a public response to the lawsuit, and the case is still unfolding in a Delaware bankruptcy court. The bankrupt exchange continues to pursue legal action to recover assets following its sudden collapse.

Zhao Accused of Market Manipulation

Furthermore, FTX’s lawsuit also accuses Zhao of publicly sabotaging FTX’s stability before its collapse.

The complaint particularly references a tweet by Zhao on November 6, 2022, in which Zhao announced Binance’s intention to sell its remaining FTT tokens, which were at that time worth approximately $529 million.

The tweet reportedly triggered a surge in withdrawals from the exchange, accelerating its collapse. It alleged that Zhao’s comments were “false, misleading, and fraudulent” and aimed at harming a business rival.

FTX Legal Battle With Firms and Individuals Following Bankruptcy

The legal action against Binance and Zhao is just one of many that the FTX estate has launched against several individuals following its bankruptcy.

The bankruptcy proceedings involve lawsuits against several of FTX’s former investors, affiliates, and clients, including high-profile individuals like former White House communications officer Anthony Scaramucci. Other defendants include Crypto.com and political organizations such as FWD.us, a group co-founded by Meta CEO Mark Zuckerberg.