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The now-collapsed cryptocurrency exchange FTX has filed a lawsuit against Binance, the world's largest crypto exchange, and its former chief executive Changpeng Zhao. The legal action seeks to claw back a staggering $1.8 billion that FTX alleges was fraudulently transferred by its disgraced co-founder Sam Bankman-Fried.
The case centers on a July 2021 share repurchase deal, in which Binance and Zhao sold their stakes of about 20% in FTX's international unit and 18.4% in its U.S.-based entity. Bankman-Fried, who is currently serving a 25-year prison sentence for his role in the FTX collapse, paid for the stock buyback using a mix of FTX's own cryptocurrency FTT, as well as Binance-branded coins BNB and BUSD, valued at $1.76 billion at the time.
However, the FTX estate claims that the share repurchase transaction was fraudulent, alleging that "FTX and its sister trading house Alameda Research may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021." This, according to the filing, means the deal should never have taken place.
In a further twist, the lawsuit also accuses Zhao of posting a series of "false, misleading, and fraudulent tweets" in the days leading up to FTX's downfall. The most notable of these was a November 6, 2022 tweet stating that Binance intended to sell its FTT tokens, worth around $529 million at the time. This triggered a wave of withdrawals from the FTX exchange, ultimately contributing to its collapse.
Binance has dismissed the claims as "meritless" and vowed to "vigorously defend" itself. Zhao, who stepped down as Binance's CEO in November 2023 after pleading guilty to a money laundering charge, has yet to respond to the allegations.
The FTX lawsuit is just one of many legal battles the collapsed exchange is fighting in the Delaware bankruptcy court. Other defendants include former White House communications officer Anthony Scaramucci, digital-asset exchange Crypto.com, and political groups such as the Mark Zuckerberg-founded FWD.US.
With billions of dollars at stake and reputations on the line, the fallout from the FTX-Binance feud is sure to have far-reaching implications for the entire crypto ecosystem.
