FTX Blames Binance And Founder Changpeng Zhao For Its Downfall, Demands $1.8 Billion In New Lawsuit
Exactly two years after filing for bankruptcy, the now-defunct crypto exchange FTX has filed a suit against Binance and its founder Changpeng Zhao, aiming to recoup nearly $1.8 billion from the worlds largest cryptocurrency exchange, which it claims was fraudulently transferred during a share repurchase deal.
FTX Hits Binance And CZ With Lawsuit
In a complaint filed on Nov. 10, the FTX bankruptcy estate claims that FTX founder Sam Bankman-Fried fraudulently transferred at least $1.76 billion worth of cryptocurrency to Binance and certain Binance executives as part of an agreement where FTX repurchased Binances equity stake.
The lawsuit claimed that Binance first acquired a 20% equity stake in FTX in 2019 with over one million in BNB tokens in a deal with the now-imprisoned crypto fraudster Bankman-Fried. The next year, Biannce execs acquired an additional 18.4% stake in West Realm Shires Services (WRS) an umbrella company of the FTX founders U.S.-based crypto entities.
Nevertheless, tensions heightened soon after as FTX gradually grew into one of Binances top rivals, according to the lawsuit. By mid-2021, the two parties negotiated a deal in which Bankman-Fried purchased back the shares for $1.76 billion in FTXs FTX token (FTT), BNB, and Binance USD (BUSD).
According to the filing, this transaction was fraudulent as FTXs sister firm, Alameda Research, was already insolvent and unable to finance it. The plaintiff mentioned testimony from ex-Alameda CEO Caroline Ellison, who indicated that Alameda was forced to use $1 billion of FTXs customer deposits to fund the repurchase deal.
CZ Orchestrated A Campaign To Destroy FTX
The FTX estate further alleged that Binances CZ staged a campaign to destroy FTX, adding that Binance conducted a months-long coordinated FUD [fear, uncertainty, and doubt] campaign against FTX back in 2022.
The plaintiffs claimed that CZ posted a series of false, misleading, and fraudulent tweets as part of a deliberate strategy to destroy FTX and improve Binances market position.
Zhaos false tweets triggered a predictable avalanche of withdrawal at FTX the proverbial run on the bank that Zhao knew would cause FTX to collapse, the complaint stated.
Notably, CZ posted on then-Twitter (now X) in November 2022, revealing that Binance would start liquidating its FTT holdings, which sparked mass market dumping of the FTT token.
By the time Zhao sent the first tweet in the Nov. 6 tweet thread, Binance had apparently already sold a massive amount of FTT in a single trade, the lawsuit claims.
Bankman-Fried stepped down as CEO after the collapse of FTX and was later convicted on seven counts of fraud, money laundering, and conspiracy. In March 2024, he was slapped with a 25-year sentence.
Text source: ZyCrypto
