TL;DR
- FTX has filed a lawsuit against Binance and its former CEO Changpeng Zhao (CZ), seeking to recover nearly $1.8 billion in alleged fraudulent transfers related to a 2021 share repurchase deal.
- The lawsuit accuses CZ of posting misleading tweets that contributed to FTX’s collapse, claiming these actions were intended to harm FTX.
- This legal action is part of FTX’s broader efforts to recover assets for its creditors amid bankruptcy, highlighting ongoing turmoil in the cryptocurrency industry.
FTX has initiated legal action against Binance Holdings Ltd. and its former CEO Changpeng Zhao (CZ), seeking to recover nearly $1.8 billion in what it alleges were fraudulent transfers. The lawsuit, filed on November 10, 2024, claims that the funds were transferred as part of a share repurchase deal between FTX and Binance in July 2021.
This legal action is part of FTX’s ongoing efforts to maximize asset recovery for its creditors amid its bankruptcy proceedings. According to the lawsuit, Sam Bankman-Fried, the co-founder of FTX, sold approximately 20% of FTX’s international unit and 18.4% of its U.S.-based entity to Binance.
The transaction was valued at $1.76 billion at the time and was paid for using a mix of FTX’s token FTT and Binance-issued coins BNB and BUSD. FTX and its sister firm Alameda Research were allegedly insolvent at the time of the transaction, making the deal fraudulent, according to the FTX estate.
Accusations Against CZ
The lawsuit also accuses CZ of posting false, misleading, and fraudulent tweets that contributed to FTX’s collapse. One such tweet, posted on November 6, 2022, claimed that Binance intended to sell $529 million worth of FTT tokens, which led to a surge in withdrawals from FTX by spooked traders. FTX alleges that these actions were maliciously calculated to destroy its rival.
FTX’s Broader Legal Context
This lawsuit is one of many that FTX has filed against former investors, affiliates, and clients in the bankruptcy court of Delaware. Other defendants include former White House communications director Anthony Scaramucci and his hedge fund SkyBridge Capital, digital-asset exchange Crypto.com, and political groups such as FWD.US.
FTX’s sister hedge fund, Alameda Research, has also filed a lawsuit against Waves founder Sasha Ivanov, seeking $90 million worth of cryptocurrencies. The legal battle between FTX and Binance highlights the ongoing turmoil in the cryptocurrency industry.
As FTX continues its efforts to recover assets for its creditors, the outcome of this lawsuit could have significant implications for both companies and the broader market.
With CZ recently released from a four-month prison sentence and Bankman-Fried serving a 25-year sentence, the stakes are high as the legal proceedings unfold.
