FTX blames Binance and CZ for collapse, seeks $1.7 billion in new lawsuit

FTX management suspected Binance of a prolonged campaign to spread negative information about the exchange.

Key Takeaways

• FTX is suing Binance and CEO Changpeng Zhao for $1.7 billion over alleged fraudulent transfers.
• The lawsuit claims the 2021 share repurchase deal involved FTX's insolvency and misleading tweets by Zhao.

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FTX has brought a lawsuit against Binance and its founder Changpeng Zhao, seeking to recover around $1.7 billion, which it claims was fraudulently transferred during a share repurchase deal. The bankrupt entity also accuses CZ of posting misleading tweets that contributed to FTX’s collapse.

In a filing dated November 10, 2024, FTX claims that the stock repurchase agreement in July 2021 between Binance and Sam Bankman-Fried, the co-founder of FTX, was fraudulent. They allege FTX and its sister company Alameda were insolvent at the time, making the deal invalid.

As part of the deal, Bankman-Fried sold approximately 20% stake in FTX’s international unit and 18.4% in its US-based entity, the filing reveals. He executed the stock repurchase using a combination of FTX’s exchange token FTT and Binance-branded coins BNB and BUSD, valued at $1.76 billion at the time of the transaction.

“Based on a proper accounting of its assets and liabilities, the debtors in these chapter 11 cases (the “Debtors”) may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021. Because of its insolvency, the Debtor Plaintiff’s July 2021 transfer of at least $1.76 billion worth of cryptocurrency to its equity holder Binance and certain Binance executives, in the form of a share repurchase, was a constructive fraudulent transfer,” according to the filing.

The filing also notes that around summer 2022, FTX management suspected that Binance was engaged in a prolonged effort to spread negative information about FTX. There were concerns that Binance and CZ were releasing “negative press statements in order to derail the FTX Group’s purchase of Voyager Digital’s assets.”

The lawsuit alleges that CZ posted “false, misleading, and fraudulent tweets” before FTX’s collapse that were “maliciously calculated to destroy his rival.” A November 6, 2022 tweet from Zhao announcing Binance’s intention to sell its FTT tokens, worth $529 million at the time, triggered a surge in exchange withdrawals.

“The claims are meritless, and we will vigorously defend ourselves,” a Binance spokesperson said in a Monday statement to Bloomberg.

The case is part of multiple lawsuits filed by FTX against former investors, affiliates, and clients in Delaware bankruptcy court, including former White House communications officer Anthony Scaramucci, crypto exchange Crypto.com, and political groups such as Mark Zuckerberg-founded FWD.US.

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