FTX Bankruptcy Estate Sues Binance and Former CEO CZ for $1.8B Over Alleged Fraud
FTX has included Binance in its ongoing series of lawsuits as part of its bankruptcy proceedings aimed at maximizing asset recovery for creditors.
Most recently, on November 10, FTX filed a lawsuit against the crypto exchange to reclaim nearly $1.8 billion that it claims was fraudulently transferred by Sam Bankman-Fried.
In the filing, FTX alleges that Binance engaged in fraudulent actions that harmed its financial standing and credibility. The lawsuit states that Binance, former CEO Changpeng “CZ” Zhao, and other executives received at least $1.76 billion in crypto through a fraudulent transfer from FTX.
FTX Alleges Fraudulent $1.76B Share Repurchase with Binance Funded by Customer Deposits
The transaction in question was a 2021 share purchase agreement that Binance made with FTX, which FTX now asserts was fraudulent due to its insolvency at the time. According to legal documents, Bankman-Fried funded the repurchase using a combination of FTX’s token, FTT, and Binance’s BNB and BUSD, which were valued at $1.76 billion.
Alameda allegedly utilized approximately $1 billion in customer deposits from FTX for the transaction, despite knowing that it lacked sufficient liquidity or resources. The lawsuit claims that this was a deliberate strategy to deceive the market into believing that both FTX and Alameda were financially stable, when in fact they were insolvent.
A spokesperson from Binance stated that the exchange would defend itself against these “meritless” claims. Zhao did not respond to Cryptonews’ request for comment at the time of press.
FTX Alleges CZ’s Tweets and Withdrawn Deal Fueled Market Panic and Collapse
FTX also accuses Zhao of intentionally undermining its operations by spreading false statements. It claims that these actions triggered a bank run and prevented FTX from securing alternative financing.
On November 6, Zhao’s tweet about Binance’s plan to sell its FTT holdings resulted in a surge of withdrawals and a bank run at FTX, according to the lawsuit. It argues that Zhao’s actions were intended to harm FTX and disrupt its efforts to secure funding.
Although Binance initially agreed to a non-binding acquisition, it quickly withdrew from the deal. This move escalated market panic and, according to the legal documents, ultimately led to FTX’s financial collapse.
FTX has initiated more than 20 legal actions in the Delaware bankruptcy court, targeting various former investors, affiliates, and clients.
The lawsuits name prominent defendants, including former White House communications officer Anthony Scaramucci, the crypto exchange Crypto.com, and political advocacy groups such as FWD.US, which was founded by Mark Zuckerberg.