FTX has filed a $1.8 billion lawsuit against Binance Holdings Ltd. and its former CEO Changpeng Zhao, aiming to recover funds it claims were fraudulently transferred by co-founder Sam Bankman-Fried.
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-branded 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, around 20% and 18.4%, respectively. The FTX estate argues that the funds used to buy out Binance’s shares were misappropriated, possibly from FTX customers and investors. The legal filing asserts that FTX and Alameda Research, its sister company, were insolvent even prior to the deal, rendering 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 of the lawsuit’s focal points is a November 6, 2022, tweet by CZ 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 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 highlights other tweets from CZ and Binance that it argues were meant 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 Waves blockchain platform, seeking to recover at least $90 million 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 Ivanov artificially inflated the value of Waves and siphoned funds from Vires, with efforts to recover these funds reportedly met with minimal cooperation from Ivanov, further complicating the case.
These lawsuits underscore FTX's strategy of leveraging legal proceedings to recover funds from various parties associated with its bankruptcy, marking a wider effort to regain assets for the company and its affiliates.
