FTX Estate Files Lawsuit Against Binance for $1.76 Billion Fraud Claim
The estate managing the bankruptcy of FTX is intensifying efforts to recover assets, targeting major cryptocurrency exchange Binance. A lawsuit filed on November 10 accuses Binance, its former CEO Changpeng Zhao (CZ), and other senior executives of fraud.
FTX May Have Been Insolvent from Day One
The lawsuit stems from a 2021 stock repurchase agreement between FTX and Binance. Sam Bankman-Fried (SBF), co-founder of FTX, sold Binance a significant stake in both FTX International and FTX US, totaling approximately 20% and 18.4%, respectively. SBF later repurchased these shares using FTX’s native token, FTT, Binance’s BNB, and Binance USD tokens, collectively valued at $1.76 billion. The estate claims this transaction occurred while FTX and Alameda Research were financially unstable.
The filing argues that FTX and Alameda “may have been insolvent from inception” and states that by early 2021 both entities were “balance-sheet insolvent.” Consequently, the estate contends the transfer was fraudulent, benefiting Binance at the expense of FTX’s customers and creditors.
SBF Accused CZ of Playing Him
This legal action is part of a broader strategy by the FTX bankruptcy estate to recover lost funds amid the fallout from the exchange's collapse. FTX, once valued in the billions, has led to extensive investigations and legal disputes across the crypto industry.
Initially, under CZ's leadership, Binance supported FTX as an ally and investor. However, their relationship soured before FTX's collapse in late 2022. During FTX's liquidity crisis, CZ and SBF had agreed on a buyout deal, which eventually fell apart. Binance stated that FTX's financial issues were too severe to resolve.
After the failed deal, SBF accused CZ of manipulation, stating, "My guess is he played me, and he played it well." He suggested that CZ did not anticipate the extent of the damage caused by the situation.