FTX Sues Binance and Changpeng Zhao for $1.8 Billion in Alleged Fraudulent Share Repurchase

In a significant development in the cryptocurrency sector, FTX, the bankrupt crypto exchange, has initiated a lawsuit against Binance and its former CEO, Changpeng Zhao (CZ), alleging fraudulent activities related to a share repurchase deal in 2021. The lawsuit, filed in the US Bankruptcy Court for the District of Delaware, seeks to freeze and recover approximately $1.76 billion in assets that FTX claims were fraudulently transferred to Binance.

The legal action centers around a transaction in July 2021 where Sam Bankman-Fried, the former CEO of FTX, agreed to repurchase Binance’s 20% stake in FTX. This repurchase was financed using FTX’s native token (FTT) and Binance-issued assets (BNB and BUSD), valued at around $1.76 billion at the time. FTX alleges that this transaction was part of a fraudulent scheme, as the company was already insolvent and the FTT tokens used had little to no actual value.

FTX’s complaint also accuses Changpeng Zhao of making misleading statements on social media that allegedly reduced the potential recoverable value for FTX stakeholders. The lawsuit claims that Zhao’s actions, including the liquidation of Binance’s substantial FTT holdings, sharply reduced the token’s value and exacerbated FTX’s financial collapse.

Binance has responded to the allegations, with a spokesperson dismissing the claims as meritless and stating that the company intends to vigorously defend against them. This legal battle could have significant implications for both exchanges, with FTX seeking to recover funds for its creditors and Binance facing increased scrutiny over its past actions.

The lawsuit is part of FTX’s broader efforts to unwind transactions and recover losses following its bankruptcy in November 2022. The case highlights the ongoing turmoil and legal complexities within the cryptocurrency market, particularly in the wake of high-profile failures like FTX.