Emily Walker
The FTX estate, following the bankruptcy of the crypto exchange, has initiated legal proceedings against Binance and its former CEO, Changpeng Zhao, for alleged fraudulent activities aimed at undermining FTX. This lawsuit, amounting to $1.8 billion, comes in addition to 23 other lawsuits filed recently to recover misallocated funds.
FTX Files $1.8 Billion Lawsuit Against Binance
FTX officially launched a lawsuit on Sunday in the US Bankruptcy Court for the District of Delaware, targeting Binance and its former head, Changpeng Zhao. The aim is to reclaim $1.76 billion in funds owed to creditors.
The filing indicates that FTX’s bankruptcy estate views the stock repurchase agreement executed by co-founder Sam Bankman-Fried through Alameda Research as fraudulent.
Between 2019 and 2020, Binance acquired significant shares in FTX, holding a 20% interest in FTX International and 18.4% in its US branch, establishing itself as the second-largest shareholder. However, in July 2021, Bankman-Fried used a combination of the bankrupt exchange’s own FTT tokens, Binance Coin (BNB), and Binance USD (BUSD) to buy back these shares for $1.76 billion.
FTX’s estate argues that the exchange and its affiliated company were likely insolvent from the start and became visibly insolvent by early 2021, thereby rendering the repurchase illegitimate.
Additionally, Caroline Ellison, the former CEO of Alameda Research, testified that the stock buyback was financed with customer deposits. Ellison, who played a critical role in the prosecution of Bankman-Fried, stated that the deal was intended to mask the company’s financial trouble.
Allegations of a Campaign Against FTX
The lawsuit accuses Changpeng Zhao of leading a campaign intended to dismantle FTX. The filing claims that Zhao disseminated “false, misleading, and fraudulent tweets” to sway customers against the already struggling exchange.
FTX’s estate further asserts that Zhao and Binance engaged in a “maliciously calculated” effort characterized by a sustained period of negative publicity targeting FTX throughout 2022.
The documentation highlights that Binance’s former CEO’s tweets on November 6, 2022, exacerbated FTX’s withdrawal issues. Zhao indicated that Binance would liquidate all its FTT tokens, valued at $529 million, in light of recent disclosures, prompting an influx of withdrawals.
The lawsuit maintains that Binance’s disposal of its FTT tokens was conducted in a manner that intentionally amplified its market effects. It asserts that Zhao’s public statements aimed to bolster Binance’s own market position at FTX’s expense.
A representative from Binance responded to these allegations, declaring them “meritless” and indicating that the exchange will defend itself vigorously.
As reported by Bitrabo, this recent legal action follows FTX’s launch of 23 lawsuits against various entities in a bid to recoup funds mismanaged by Bankman-Fried as creditors await payouts anticipated to commence in late 2024.
The recent actions by FTX’s estate also include lawsuits against Crypto.com, a group founded by Mark Zuckerberg advocating for immigration and justice, and Anthony Scaramucci’s hedge fund, SkyBridge Capital.
