SUMMARY
- FTX filed a lawsuit against Binance and its founder Changpeng Zhao, seeking to recover $1.76 billion in a fraudulent transaction.
- Binance dismissed the claims as “meritless,” as FTX bankruptcy estates continue efforts to claw back funds for creditors.
FTX has filed a lawsuit against Binance and its founder Changpeng Zhao, looking to recoup $1.76 billion. The claim alleges that a fraudulent transaction happened when FTX repurchased shares from Binance and its executives in 2021. FTX claims that the transfer, conducted in the form of a share repurchase worth $1.76 billion, was fraudulent since the company was already insolvent at the time.
According to the filing, Binance at first acquired a 20% stake in FTX in November 2019, utilizing over one million BNB tokens. This deal, which was negotiated with Sam Bankman-Fried, at that point co-founder of FTX, paved the way for further ventures. In 2020, Binance executives also procured an 18.4% stake in WRS, an umbrella company that held Bankman-Fried’s U.S.-based crypto entities.
The lawsuit claims that by 2021, FTX bought back the shares held by Binance and its officials for $1.76 billion, utilizing FTX’s exchange tokens FTT, BNB, and BUSD. However, the filing contends that at the time, FTX’s sister company, Alameda, was insolvent and incapable of financing the transaction. This need for liquidity raised questions about the authenticity of the repurchase, as FTX was utilizing depositors’ funds to back the deal, concurring with testimony from Caroline Ellison, former CEO of Alameda.
In addition to the fraudulent transfer claims, the claim charges that Zhao played a critical part in the exchange’s collapse. It accuses him of utilizing “false, misleading, and fraudulent” tweets to weaken FTX. Specifically, Zhao’s tweet in November 2022, expressing that Binance would sell off its FTT holdings, is said to have started a panic and activated withdrawals from FTX, in the long run leading to its collapse.
Binance has expelled these claims, calling them “meritless” and promising a vigorous defense. The FTX estate has moreover recorded over 20 lawsuits against other entities and people included in the company’s collapse, including executives, investors, and companies, in an endeavor to recoup billions of dollars misplaced amid the downfall. The result of these lawful procedures could have noteworthy implications for the future of the crypto industry or could be a last attempt by FTX to recover some assets.