FTX Files $1.8 Billion Lawsuit Against Binance and Changpeng Zhao Over Alleged Fraudulent Transfers

FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao (CZ), seeking $1.8 billion in return. 

JUST IN: FTX sues Binance and ex-CEO Changpeng Zhao (CZ), seeking $1.8 billion.

— Watcher.Guru (@WatcherGuru) November 11, 2024

The lawsuit, filed in Delaware’s bankruptcy court, alleges that Binance and CZ received these funds as part of a 2021 share repurchase agreement facilitated by FTX’s co-founder, Sam Bankman-Fried. 

FTX claims that this transaction was fraudulent and orchestrated to siphon off funds, marking the latest development in the company’s efforts to recover assets following its high-profile collapse in 2022.

Allegations of Fraudulent Transfers and Financial Destabilization

FTX’s lawsuit centers on a July 2021 transaction in which Bankman-Fried allegedly utilized a mix of FTT, BNB, and BUSD assets to repurchase approximately 20% of FTX International and 18.4% of its U.S. division from Binance. 

According to FTX, the total value of these assets at the time was close to $1.76 billion. The exchange contends that these funds were funneled away from FTX and its affiliate, Alameda Research, when both entities may have been financially vulnerable or even insolvent.

In its court filing, FTX’s estate argues that this share repurchase arrangement was fraudulent due to FTX’s alleged financial instability in early 2021.

The exchange claims the deal should be voided, allowing for a clawback of the funds. FTX’s legal team has positioned this argument as part of a broader strategy to reclaim assets for creditors as the bankruptcy proceedings continue.

CZ’s Statements and Their Alleged Role in FTX’s Collapse

The lawsuit further alleges that Zhao’s statements contributed to FTX’s destabilization and subsequent collapse. In November 2022, CZ announced via social media that Binance intended to sell off its $529 million worth of FTT token holdings. 

This declaration led to a surge in withdrawals from FTX, triggering a liquidity crisis that ultimately culminated in FTX’s collapse. According to FTX’s filing, CZ’s public comments aimed to undermine FTX’s financial stability and exacerbated its already precarious situation.

Broader Legal Moves Amid Bankruptcy Proceedings

This lawsuit against Binance and CZ forms part of a series of legal actions initiated by FTX in Delaware’s bankruptcy court. In related actions, FTX recently filed a lawsuit against a group of Chinese nationals, accusing them of participating in large-scale money laundering through the platform. 

The exchange alleges that these individuals and other unidentified persons laundered substantial sums, with withdrawals of $468 million in cash and crypto assets during a critical 90-day period.