FTX has filed a $1.8 billion lawsuit against Binance and its former CEO, Changpeng Zhao (CZ), seeking to recover funds allegedly fraudulently transferred by its co-founder, Sam Bankman-Fried (SBF), in a share repurchase deal.
Background of the Share Repurchase Deal
FTX’s lawsuit claims that Binance, CZ, and other Binance executives received $1.76 billion in FTX tokens (FTT) and Binance coins (BNB and BUSD) as part of a July 2021 share repurchase deal. In this transaction, Binance reportedly sold back its stakes in FTX's international and US-based entities, which were around 20% and 18.4%, respectively. FTX’s estate argues that the funds used to buy out Binance’s shares were misappropriated, possibly from FTX customers and investors. The legal filing claims that FTX and its sister company, Alameda Research, were insolvent even before the deal, making the transaction a "fraudulent transfer."
Allegations Against CZ and Binance’s Role
The FTX estate alleges that CZ’s actions were part of a broader scheme to destabilize FTX. One focal point of the lawsuit is a tweet by CZ on November 6, 2022, announcing that Binance intended to sell its FTT holdings, worth approximately $529 million at the time. This announcement reportedly caused mass withdrawals and a liquidity crisis at FTX, triggering the exchange’s eventual collapse. FTX’s estate claims that CZ’s tweet was a calculated move to harm FTX, labeling it as “false, misleading, and fraudulent.” According to the filing, CZ’s announcement was intended to damage FTX’s reputation and drive users away from the platform. The estate also points to other tweets from CZ and Binance that it argues were intended to mislead FTX’s customers and destabilize the market.
Lawsuit Against Waves Founder
In another legal move, FTX’s sister company Alameda Research has filed a separate lawsuit against Aleksandr Ivanov, the founder of the blockchain platform Waves, on November 9, seeking to recover at least $90 million in assets allegedly tied to Vires.Finance, a liquidity platform on the Waves blockchain. According to Alameda’s filing, the company deposited $80 million in USDT and USDC on Vires.Finance, which was later converted to around $90 million in Waves’ stablecoin USDN. Alameda claims that Ivanov artificially inflated the value of Waves and siphoned funds from Vires. Efforts to recover these funds have reportedly been met with minimal cooperation from Ivanov, further complicating the case.
FTX's lawsuit is part of a broader legal strategy to recover funds from various parties associated with the company’s bankruptcy. The case sheds light on FTX's financial instability and its efforts to recoup misappropriated funds.
