FTX, the collapsed cryptocurrency exchange, has filed a lawsuit against Binance and its former CEO Changpeng Zhao (CZ), seeking to recover $1.8 billion. The lawsuit, lodged in Delaware, alleges that Binance and its executives fraudulently received funds from FTX during a share repurchase deal in July 2021. This legal action is part of FTX’s ongoing efforts to reclaim assets for its creditors following its dramatic collapse in late 2022.
FTX’s lawsuit claims that its Alameda Research division funded the share repurchase using tokens valued at $1.76 billion at the time. The lawsuit argues that Alameda was insolvent at the time of the transaction and could not afford to fund it, making the deal effectively fraudulent. The administrators of the FTX estate are seeking compensatory and punitive damages in addition to the $1.76 billion.
Binance initially acquired a stake in FTX in 2019, but tensions between the two companies grew over time. In July 2021, Binance negotiated to sell its stake back to FTX, with the transaction funded by FTX’s native token (FTT), Binance Coin (BNB), and Binance USD (BUSD). The deal has since been called into question, with FTX alleging that it was a constructive fraudulent transfer.
A spokesperson for Binance has dismissed the claims as meritless and stated that the company will vigorously defend itself. Zhao, known as “CZ,” has not yet commented on the lawsuit. The legal battle is the latest development in a series of disputes between FTX and Binance, which intensified after FTX’s collapse.
The outcome of this lawsuit could have significant repercussions for the cryptocurrency sector, particularly regarding governance and financial transactions among major exchanges. The case highlights the need for greater transparency and accountability in digital asset management, as regulators continue to scrutinize cryptocurrency exchanges.
