FTX has filed a lawsuit against Binance, marking another step in its efforts to maximize asset recovery for creditors amidst bankruptcy proceedings.
On November 10, FTX initiated legal action to recover nearly $1.8 billion, alleging that former CEO Sam Bankman-Fried fraudulently transferred funds to Binance.
The lawsuit targets Binance, its former CEO Changpeng “CZ” Zhao, and other top executives, claiming that they benefited from at least $1.76 billion in cryptocurrency through these disputed transactions.
FTX asserts that Binance’s actions caused severe financial damage and tarnished its credibility, further exacerbating FTX’s financial downfall.
Allegations of a Fraudulent $1.76B Buyback Deal
At the centre of FTX’s claim is a 2021 stock repurchase agreement with Binance, which FTX now alleges was fraudulent.
According to court documents, Bankman-Fried orchestrated the share buyback using a mix of FTX’s native token (FTT), Binance’s BNB, and Binance USD (BUSD), totalling approximately $1.76 billion.
The filing states that Alameda Research, an affiliated trading firm, used around $1 billion from FTX customer deposits to fund this buyback.
FTX claims this manoeuvre aimed to present a façade of financial stability while masking underlying insolvency.
Binance Responds to “Meritless” Lawsuit Claims
A spokesperson for Binance has dismissed FTX’s accusations as “meritless.” However, at press time, Zhao has not responded directly to Cryptonews’ request for comment on the matter.
FTX Claims CZ’s Tweets Escalated Panic, Contributing to Its Collapse
FTX’s lawsuit goes further, accusing Zhao of spreading misinformation to damage FTX’s operations. In particular, it points to Zhao’s November 6, 2022, tweet announcing Binance’s intent to sell its FTT holdings.
This statement reportedly triggered mass withdrawals from FTX, compounding liquidity issues and, according to FTX, thwarting its efforts to secure alternative funding.
Binance initially agreed to a non-binding acquisition of FTX but quickly withdrew, a decision that FTX claims intensified market panic and ultimately led to its financial collapse.
FTX’s Broad Legal Strategy for Asset Recovery
The lawsuit against Binance is one of over 20 actions filed by FTX in Delaware’s bankruptcy court.
The platform has also targeted other notable defendants, including former White House communications director Anthony Scaramucci, Crypto.com, and advocacy organizations like FWD.US, founded by Mark Zuckerberg.
FTX’s aggressive legal strategy seeks to reclaim lost assets as it navigates bankruptcy, with this high-profile lawsuit against Binance potentially being one of its most pivotal cases.
