Infamous crypto exchange FTX filed a lawsuit against another crypto exchange giant Binance and its former CEO, Changpeng Zhao, seeking to recover at least $1.76 billion in funds allegedly fraudulently transferred during a 2021 deal.
What’s the significance: The legal action emphasizes the ongoing financial fallout from FTX’s collapse, highlighting potential malpractices and legal battles involving major crypto players.
Key Details: The lawsuit is part of a general effort to recoup funds for FTX creditors, as the exchange’s bankruptcy proceedings continue to reveal complex financial mismanagement and conflicts with Binance and other entities.
- The lawsuit alleges that FTX founder Sam Bankman-Fried transferred $1.76 billion worth of cryptocurrency to Binance in July 2021, as part of a deal to repurchase Binance’s equity stake.
- It also claims the repurchase deal was done hastily and was fraudulent, with Zhao allegedly using leverage to extract billions from a struggling FTX, noting that the shares were deemed worthless when the transaction took place.
- Alleged Sabotage: The lawsuit then accuses Zhao of attempting to damage FTX’s operations after divesting his stake and orchestrating a campaign to discredit the exchange, though these allegations remain to be proven in court.
Binance Connection with FTX in a timeline:
- As per FTX, Binance acquired a 20% stake in the exchange in 2019, but tensions rose as FTX became a major competitor to Binance.
- By mid-2021, Binance had decided to exit its 20% stake, with FTX allegedly transferring $1.76 billion in cryptocurrency, including $FTT, $BNB, and $BUSD, as part of the deal.
- In 2022, Binance’s tweets about FTX’s financial situation, including the repurchase deal and intentions to sell $FTT, led to a mass withdrawal of funds from FTX.
- From November 6 to 7, 2022, FTX saw around $6 billion in withdrawals, exacerbating its liquidity crisis and contributing to its collapse.
- It can be remembered that Binance eventually dropped the bid because “the issues are beyond our control or ability to help.”
- Accordingly: The lawsuit also alleges that Binance used tweets to block FTX from securing alternative funding.
On the other hand: FTX and Alameda have also filed lawsuits against the following individuals and entities:
- Anthony Scaramucci and SkyBridge Capital: The lawsuit aims to recover over $100 million, alleging that investments made in 2022 were used to enhance Bankman-Fried’s standing without providing value.
- Humpy the Whale: The lawsuit is for $1 billion in losses due to alleged market manipulation and links to organized crime.
- Waves Founder Aleksandr Ivanov: It is seeking to recover $90 million in assets, accusing him of manipulating the value of $WAVES, siphoning funds from Vires.Finance, and attempting to extort Alameda.
- Crypto.com: The lawsuit aims to recover over $11 million from an account allegedly controlled by Alameda Research, claiming the funds belong to FTX creditors and accusing Crypto.com of blocking access to the assets.
What to watch: The legal proceedings, especially whether the lawsuit can successfully recover the funds and hold Binance and other entities accountable.
Worth reading: Although Binance and Zhao have yet to issue statements, the former Binance CEO denied any conspiracy against FTX in 2022, explaining that his actions, such as liquidating FTX tokens, were simply part of risk management, not a targeted move against the competitor.
This article is published on BitPinas: FTX Sues Binance, CZ for $1.76B Over Alleged Fraudulent Deal
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