The estate of bankrupt crypto exchange FTX filed a lawsuit against Binance and its former CEO, Changpeng Zhao, for alleged fraudulent transfers and starting a campaign to “destroy” its competitor. The $1.8 billion legal action follows another 23 lawsuits filed last Friday to claw back part of the ill-spent 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 global crypto exchange Binance and its former CEO Changpeng Zhao and seeking to recover $1.76 billion in creditors’ funds.
According to the court document, the exchange’s bankruptcy estate argues that FTX’s stake repurchase deal, led by its co-founder and former CEO, Sam Bankman-Fried, using 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 exchange’s second-largest shareholder. However, in July 2021, Bankman-Fried, also known as SBF, paid $1.76 billion to repurchase the stock with a mix of the bankrupt exchange’s FTT token, Binance Coin (BNB), and Binance USD (BUSD).
FTX’s estate claims that the exchange and its sister company “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021,” making the repurchase deal fraudulent.
FTX claims fraudulent transfer due to insolvency. Source: Sunil on X
Moreover, the filling adds that the now-incarcerated Caroline Ellison, the former CEO of Alameda Research, previously testified that the repurchase deal was done with customer deposits. Ellison, a key witness in SBF’s prosecution, revealed that Bankman-Fried went through with the deal to conceal the company’s insolvency.
CZ And Binance’s Alleged Campaign Against FTX
The lawsuit accused Binance’s co-founder and former CEO, Changpeng Zhao, of orchestrating a “campaign to destroy FTX.” The document alleges that Zhao posted a series of “false, misleading, and fraudulent tweets” to turn customers against the now-bankrupt exchange.
Additionally, the estate claims that CZ and Binance engaged in “maliciously calculated” efforts, with “months-long coordinated FUD” to attack FTX in 2022.
Per the document, Binance’s former CEO’s tweets on November 6, 2022, aggravated the exchange’s withdrawal situation. Zhao announced that Binance would sell all its FTT tokens, worth $529 million at the time, following the “recent revelations that came to light,” causing a rise 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 done in a way that “would minimize the market impact.” Instead, it claims that Zhao announced its selling plans to “maximize the PR impact of it” and “increase Binance’s market share.”
However, a Binance spokesperson told Bloomberg that the claims are “meritless” and the exchange will “vigorously defend” itself.
As reported by Bitcoinist, yesterday’s legal action follows FTX’s 23 lawsuits against different entities to recover the ill-spent funds by SBF ahead of the creditors’ payout, expected to start in the last weeks of 2024.
FTX estate’s recent lawsuits include Singaporean exchange Crypto.com, Mark Zuckerberg-founded immigration and justice advocacy group FWD.US, 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
