The defunct cryptocurrency exchange believes Binance conducted fraudulent transactions
FTX launched a lawsuit against Binance and its former CEO, Changpeng Zhao, claiming that $1.8 billion in “fraudulent transfers” were made to Binance and its executives. The lawsuit hinges on a 2021 transaction where Binance sold back its stake in FTX, acquired in 2019, to FTX itself.
According to FTX’s legal filings, its Alameda Research division, which was insolvent at the time, provided the funds for the buyback using tokens valued at roughly $1.76 billion. FTX argues that because Alameda lacked the financial stability to cover such a transaction, the buyout should never have occurred.
The administrators of FTX’s estate aim to recover these funds on behalf of FTX creditors, alleging that the money was transferred at their expense. The estate’s filing in Delaware claims FTX is seeking at least $1.76 billion, in addition to unspecified compensatory and punitive damages.
A Binance spokesperson responded to the allegations, calling them “meritless” and affirming the company’s commitment to defending itself against the claims. Zhao, mainly known as “CZ,” has yet to publicly respond to the lawsuit.
This legal dispute adds another chapter to the contentious relationship between FTX and Binance, once prominent rivals in the cryptocurrency industry. FTX was at its peak before its sudden collapse in 2022. Binance had initially considered acquiring FTX’s non-US assets to stabilize the struggling firm but eventually backed out, leaving FTX to face its downfall.
The lawsuit comes as FTX’s founder, Sam Bankman-Fried, is serving a 25-year prison sentence for misappropriating billions of customer funds, while Zhao recently received a four-month sentence after admitting to money laundering violations at Binance, the world’s largest crypto exchange. This legal clash underscores the ongoing fallout from FTX’s collapse and the scrutiny surrounding major players in the cryptocurrency sector.
