In a recent judicial action, the FTX bankruptcy estate sued Binance and its former CEO, Changpeng Zhao (CZ), seeking $1.8 billion. The estate claims that Sam Bankman-Fried, FTX’s co-founder, and Binance entered into a fraudulent 2021 stock repurchase arrangement. They assert that FTX’s bankruptcy rendered this transaction, which involved the transfer of approximately $1.76 billion in crypto assets, invalid.
According to the lawsuit, Bankman-Fried utilized FTX’s own token, FTT, as well as Binance’s BNB and Binance USD (BUSD), to fund the repurchase, raising concerns about the transaction’s authenticity. By early 2021, the estate alleges that FTX and its sister firm, Alameda Research, lacked the financial stability to support the purchase, implying that the transaction’s purpose was to deceive investors and maintain FTX’s perceived financial health.
The lawsuit complaint also accuses Zhao of a planned strategy to disrupt FTX, citing a number of public statements and acts that purportedly damaged the company. The estate specifically notes a tweet by Zhao in November 2022 in which he declared Binance’s plan to liquidate its holdings in FTT, which resulted in a rise in FTX withdrawals and increased financial burden on the company. The estate alleges Zhao’s comments, as well as Binance’s abrupt liquidation of FTT, were part of a purposeful attempt to harm FTX’s reputation and market position, contributing to the company’s eventual collapse.
Furthermore, the lawsuit claims that Zhao’s public statements about a potential acquisition of FTX were meant to provide the impression of due diligence, only for Binance to walk out of the deal at a critical point, thereby blocking FTX from obtaining alternative financing. The estate claims that these acts misled FTX’s investors and creditors, aggravating the company’s financial woes.
This case is part of a larger effort by the FTX bankruptcy estate to recover funds through various legal actions against persons involved in FTX’s business. Earlier lawsuits sought to recoup monies from other firms and individuals involved in transactions with FTX, as the estate worked to maximize recovery for creditors following the company’s bankruptcy. The FTX estate remains staunch in its assertion that Binance and Zhao acted to jeopardize FTX’s financial stability, which Binance has rejected, calling the lawsuit’s allegations unfounded.
