The bankrupt crypto exchange FTX has made several headlines since its collapse in 2022. It recently filed a lawsuit in the bankruptcy court of Delaware against Binance and its former CEO and co-founder, Changpeng Zhao (CZ). The defunct exchange wants to recover $1.8 billion, which it claims to have been fraudulently transferred to Binance.
FTX Sues Binance
The lawsuit involves a 2021 transaction that was part of a share repurchase deal worth $1.76 billion. Binance and its executives, including the co-founder CZ, sold their stakes in FTX back to the company’s co-founder, Sam Bankman-Fried (SBF). The stakes were significant, with Binance owning 20% of FTX’s international unit and 18.4% of its US-based entity.
To pay for the shares, Bankman-Fried used a combination of FTX’s native token (FTT), Binance-affiliated crypto BNB, and Binance USD (BUSD). At the time, the deal seemed like a regular legal business transaction — however, the lawsuit claims otherwise, alleging that the transaction was entirely fraudulent and, hence, invalid.
The filing mentioned that FTX may have already been insolvent from its inception and did not have enough assets to cover its debts, implying that SBF’s payment was fraudulent. As a result, the exchange’s bankruptcy estate is suing Binance and Zhao to recover the $1.8 billion, claiming the transaction was fraudulent and should be reversed.
The filing also accused CZ of posting false, misleading tweets that contributed to FTX’s collapse. It claims the tweet announcing Binance’s intention to sell FTT triggered massive withdrawals from the platform and resulted in more market panic, which impacted FTT’s decline. It believes the actions were mainly designed to destroy the rival exchange.
FTX in a Suing Spree
As part of its bankruptcy proceedings, FTX is taking legal action to recover funds to repay its creditors, which has led to multiple lawsuits. Last week, it sued Crypto.com, a Singapore-based exchange, to recover $11.4 million in assets held in Alameda Research’s account on the platform.
FTX is also seeking to recoup funds from Bankman-Fried’s influence-buying campaign. The lawsuit alleged that Scaramucci’s SkyBridge Capital investments did not benefit the defunct exchange. Its trading arm, Alameda Research, also sued Aleksandr Ivanov, founder of Waves and affiliated entities, to recover at least $90 million.
As FTX’s Estate executes its bankruptcy plan, the crypto industry anticipates more legal battles, targeting individuals and entities that received funds from FTX before its collapse.
