The legacy of crypto exchange FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao, for allegedly fraudulent transfers and starting a campaign to “destroy” its rival. The $1.8 billion lawsuit follows 23 other lawsuits filed last Friday to recover part of the misappropriated funds.
Binance Hit With $1.8 Billion Lawsuit
On Sunday, FTX filed a lawsuit in the US Bankruptcy Court for the District of Delaware, suing the crypto exchange Binance and its former CEO Changpeng Zhao and seeking to recover $1.76 billion in creditors.
According to the court document, the bankruptcy estate claims that the deal to buy back the stake in FTX, led by founder and former CEO Sam Bankman-Fried, through its sister company, Alameda Research, was fraudulent.
Between 2019 and 2020, Binance acquired a 20% stake in FTX International and an 18.4% stake in its US-based unit, becoming the second largest shareholder. However, in July 2021, Bankman-Fried, also known as SBF, paid $1.76 billion to buy back stock in a combination of the FTT exchange token, Binance Coin (BNB), and Binance USD ( BUSD).
FTX’s estate says the exchange and its sister company “may not have been insolvent from the start and certainly were insolvent by early 2021,” making the repurchase agreement a sham.
FTX claims fraudulent transfer due to insolvency. Source: Sunil on X
In addition, the filing adds that now-imprisoned Caroline Ellison, the former CEO of Alameda Research, previously testified that the repurchase agreement was made with customer deposits. Ellison, a key witness for SBF’s prosecution, testified that Bankman-Fried went through with the deal to hide the fact that the company was insolvent.
CZ and Binance’s campaign against FTX
The lawsuit accused Binance’s founder and former CEO, Changpeng Zhao, of orchestrating a “campaign to destroy FTX.” The document alleges that Zhao sent a series of “false, misleading, and fraudulent” tweets to get customers to object to the now-bankrupt exchange.
Additionally, the estate claims that CZ and Binance are engaging in “viciously calculated” efforts, with “months-long coordinated FUD” to attack FTX in 2022.
According to this document, the tweets of the former CEO of Binance on November 6, 2022, fueled the withdrawal situation of the exchange. Zhao announced that Binance will sell all of its FTT tokens, worth $529 million at the time, following “recent revelations that have come to light,” causing a surge in withdrawals.
CZ's X thread on Nov. 6, 2022. Source: Sunil on X
The lawsuit argues that Binance’s public sale of its FTT tokens was not conducted in a manner that would “minimize market impact.” Instead, it says Zhao announced his sales plans to “increase PR impact” and “increase Binance’s market share.”
However, a Binance spokesperson told Bloomberg that the claims are “without merit” and that the exchange will “vigorously defend itself”.
As reported by Bitcoinist, yesterday’s legal action follows 23 FTX lawsuits against various entities to recover money misappropriated by SBF before the payment of creditors, which is expected to begin in the last weeks of 2024.
Recent cases in the FTX estate include Singaporean Crypto.com, FWD.US founded by Mark Zuckerberg’s immigration team and Anthony Scaramucci’s hedge fund, SkyBridge Capital.
Binance Coin (BNB) trades at $623 in the weekly chart. Source: BNBUSDT on TradingView
Featured image from Unsplash.com, Chart from TradingView.com
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