FTX is suing Binance and Changpeng Zhao (CZ) for $1.8 billion over a 2021 share repurchase deal.
The lawsuit alleges the deal was fraudulent due to FTX’s insolvency at the time.
FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao, in a bid to recover nearly $1.8 billion. The lawsuit, filed on November 10, alleges that Binance and Zhao received these funds as part of a fraudulent share repurchase deal in July 2021. This move marks another effort by the FTX bankruptcy estate to claw back assets following the exchange’s collapse.
The dispute stems from a 2021 agreement in which FTX co-founder Sam Bankman-Fried repurchased stakes from Binance. According to the FTX estate, Bankman-Fried used a mix of their native token (FTT), Binance Coin (BNB), and Binance USD (BUSD) to fund the transaction. It which was valued at $1.76 billion at the time. However, the exchange argues that both FTX and Alameda Research, its trading arm, were already insolvent at that time. As a result, it considers the transaction to be fraudulent.
Did CZ’s Actions Lead to FTX’s Downfall?
The lawsuit asserts that the share repurchase deal was improper, claiming it was funded with FTX’s depositor funds. Caroline Ellison, the former CEO of Alameda, testified that she had cautioned Bankman-Fried about the lack of funds to back the buyback. Consequently, this raised serious concerns regarding the legitimacy of the transaction. As a result, the deal raised serious concerns regarding its financial legitimacy. Despite these concerns, the deal went ahead. FTX claims the repurchased shares were essentially worthless due to the company’s financial instability.
In addition to challenging the repurchase deal, they accuse Zhao of exacerbating the situation with damaging public statements. Zhao’s tweets in November 2022, particularly one about Binance selling off its FTT holdings, allegedly triggered a massive withdrawal crisis at FTX. This led to a rapid collapse in the value of their assets, further destabilizing the exchange and leaving creditors with significant losses.
The FTX estate contends that these actions were aimed at undermining its market position and intentionally causing its collapse. Binance has yet to respond in detail to the lawsuit, with a spokesperson dismissing the claims as meritless.Highlighted Crypto News TodayAre PEPE Bulls Gearing Up for a Bigger Rally?
