Bankrupt cryptocurrency exchange FTX has filed a lawsuit against Binance Holdings Ltd. and its former CEO, Changpeng Zhao. The case, filed in Delaware’s bankruptcy court, is trying to recover about $1.8 billion that FTX claims its co-founder, Sam Bankman-Fried, moved improperly. According to FTX, the funds were transferred as part of a 2021 clawback agreement with Binance and Zhao. FTX believes this deal was established on shaky financial ground.
Binance’s Stake Deal
According to the latest report, Binance executives and Zhao agreed to sell stakes in FTX international and US-based entities in July 2021. The transaction gave Binance around 20% of FTX’s international shares and 18.4% of the US unit in return. FTX’s estate alleges that Bankman-Fried financed this clawback using a combination of FTX’s exchange token (FTT) and Binance-branded tokens (BNB and BUSD), valued at $1.76 billion.
The filing suggests that FTX and Alameda Research may have been unable to pay their debts from the very start and were officially in debt by early 2021. This indicates that FTX’s financial system was vulnerable even before the deal. The estate also accused Binance and Zhao of fraud in the clawback arrangement to challenge the transfer and regain the money.
FTX also accused Zhao of making statements that were prejudicial to FTX’s interest in the public domain. The estate refers to Zhao’s tweet dated November 6, 2022, in which he announced that Binance was to sell its FTT for $529 million.
Ongoing Legal Actions
However, Binance’s legal representatives have yet to comment on the issue, and the present lawsuit is one of the many legal procedures FTX has conducted. Some of the most high-profile defendants include the former White House communications officer, Anthony Scaramucci, digital asset exchange Crypto.com, and the political organization FWD.US.
S&C Lawsuit Dismissed: How Will It Impact FTX Creditors?In related news, Alameda Research, FTX’s sister company, has sued Waves founder Sasha Ivanov to reclaim $90 million in crypto deposited on Vires.Finance. The lawsuit alleges that in March 2022, Alameda transferred approximately $80 million in Tether (USDT) and USD Coin (USDC). These funds were converted into Neutrino Protocol’s USDN stablecoin. USDN lost its dollar peg several times, was rebranded as Neutrino USD (XTN), and is now nearly worthless.
The attempts made by FTX to recover money for creditors and other shareholders show that the struggle between the cryptocurrency exchanges persists. This case demonstrates the convergence of high risks associated with the industry’s financial arrangements.
