FTX is suing former crypto rival Binance for $1.8 billion
Failed cryptocurrency exchange FTX sued former rival Binance to recoup nearly $1.8 billion that was sent by former FTX CEO Sam Bankman-Fried.
The lawsuit, filed in Delaware Bankruptcy Court on Sunday, centers on a July 2021 transaction where FTX bought back stakes held by Binance CEO Changpeng Zhao and other executives. The deal was carried out by FTX’s sister company, Alameda Research, which, the lawsuit claims, was already insolvent at the time.
That meant Alameda had to dig into about $1 billion FTX’s capital — received from its depositors — to pay for the share repurchase, former Alameda Research CEO Caroline Ellison testified in court. As a result, FTX has alleged it was a “constructive fraudulent transfer.”
“In other words, the FTX Trading shares acquired through the share repurchase were actually worthless based on a proper accounting of FTX Trading’s assets and liabilities,” the lawsuit alleges.
In total, FTX bought back a 20% stake in the platform and an 18.4% stake in its U.S.-based firm, West Realm Shires.
“The claims are meritless, and we will vigorously defend ourselves,” Binance said in a statement.
Zhao and Bankman-Fried originally had a friendly rivalry within the crypto industry as the heads of the largest and second-largest exchanges by trading volume at the time. Binance first invested in FTX when Bankman-Fried launched the exchange in 2019.
In the years following, and particularly in the aftermath of the share repurchasing, the relationship deteriorated. The lawsuit has accused Zhao of making “false, misleading, and fraudulent tweets that were maliciously calculated to destroy his rival FTX, with reckless disregard to the harm that FTX’s customers and creditors would suffer.”
Bankman-Fried was sentenced to 25 years in prison following FTX’s dramatic collapse in November 2022, which resulted in some $10 billion in lost customer funds.
In April, Zhao was sentenced to four months in prison for allowing rampant money laundering on Binance’s exchange. Zhao pled guilty last year to one count of failing to maintain an anti-money-laundering program, stepped down from his role as Binance CEO, and agreed to settle related allegations for $4.3 billion.
The lawsuit is one of 23 filed by the FTX estate over the weekend. Defendants include Anthony Scaramucci and his hedge fund SkyBridge Capital; Crypto.com; and the Mark Zuckerberg–founded political organization FWD.US.
