In a new legal battle, a group of firms involved in the ongoing FTX bankruptcy proceedings has filed a lawsuit against Binance and its former CEO, Changpeng Zhao.
The emerging lawsuit alleges that Binance received at least $1.76 billion in crypto assets from FTX through fraudulent transfers. This lawsuit signifies another attempt by the FTX bankruptcy estate to recover assets from other crypto companies following FTX’s dramatic collapse in 2022.
Binance allegedly involved in fraudulent transfer with FTX’s Sam Bankman-Fried.
Filed on 10 November 2024, the complaint states that Binance and Zhao received the funds as part of a July 2021 repurchase deal with former FTX CEO Sam Bankman-Fried, who is currently serving a 25-year prison sentence. According to the document, Bankman-Fried repurchased approximately 20% of FTX International and 18.4% of FTX US, known as West Realm Shires Services, in a transaction that involved a mix of FTX Token (FTT), Binance Coin (BNB), and Binance USD (BUSD).
As reflected in the filing, the FTX bankruptcy estate argues that this transaction was fraudulent given FTX and its sister company, Alameda Research, were insolvent at the time and lacked sufficient assets to back up their liabilities. Therefore, the lawsuit claims the share repurchase was conducted under false pretenses.
Read also: CFTC Case: FTX and Alameda Research fined $12.7B and banned.
Another key accusation in the lawsuit is that Binance’s liquidation of FTT tokens was not conducted with “minimal market impact,” as Zhao had claimed. Instead, the plaintiffs allege that Zhao’s actions were aimed at driving down the price of FTT, which would ultimately damage FTX and benefit Binance.
“By the time Zhao sent the first tweet in the Nov. 6 tweet thread, Binance had apparently already sold a massive amount of FTT in a single trade, ” part of the filing read. By selling off a massive amount of FTT in a single trade, Binance allegedly maximized the market impact, causing FTT’s value to plummet and affecting FTX’s financial health, it implied.
The complaint further claims that Binance “never intended to complete the acquisition” of FTX when it publicly announced its interest amid FTX’s liquidity crisis in 2022. The FTX bankruptcy estate argues that Zhao’s announcement was designed to appear as due diligence, preventing FTX from seeking other sources of financing and leading to further harm to the exchange and its creditors.
Read also: Is the bankrupt crypto exchange FTX going to relaunch?
The lawsuit also accuses Zhao of waging a “campaign to destroy FTX,” citing Binance’s role in spreading fear, uncertainty, and doubt (FUD) about the rival exchange at that time. It claims that Zhao and Bankman-Fried were locked in an ongoing rivalry that culminated in FTX’s downfall. Overall, the FTX bankruptcy estate argues that Binance’s massive FTT liquidation and Zhao’s public statements in November 2022 were part of a larger strategy to harm FTX’s reputation and ultimately increase Binance’s market share.
Notably, the lawsuit against Binance and Zhao is the latest in a series of legal actions taken by the FTX bankruptcy estate as it seeks to recover lost assets or secure funds to pay back creditors and investors impacted by FTX collapse. Meanwhile, a day before this filing, this group of firms initiated a lawsuit against SkyBridge Capital and its founder, Anthony Scaramucci, aiming to recover over $100 million that Bankman-Fried spent on sponsorship and investment deals.
Read also: FTX Collapse: Does FTX Token (FTT) have a future?
Credit: Ndianabasi Tom
A crypto journalist and content writer who has been talking about cryptocurrency and blockchain technology since 2018, Ndianabasi is a Writer at Crypto Asset Buyer (CAB).
