Collapsed Crypto Giant Aims to Recover Billions in New Legal Battle
Collapsed cryptocurrency firm FTX has launched a $1.8 billion lawsuit against rival Binance and its former CEO, Changpeng Zhao, claiming the massive transfer was “fraudulently managed” by FTX’s own executives. The lawsuit centers on an agreement where Binance sold its stake back to FTX in 2021, a deal that FTX’s administrators now argue was mishandled to the detriment of creditors.
Background of the FTX-Binance Deal
The lawsuit traces back to 2019, when Binance acquired a stake in FTX, then a rising cryptocurrency exchange headed by founder Sam Bankman-Fried. In 2021, FTX repurchased Binance’s shares in a $1.8 billion transaction, funded by its affiliated trading arm, Alameda Research. According to the lawsuit, Alameda used tokens valued at $1.76 billion to cover the cost—despite being insolvent at the time. FTX alleges the transaction should have been halted, as it ultimately diverted funds away from creditors to Binance.
The complaint, filed in Delaware, seeks to reclaim the $1.76 billion, along with compensatory and punitive damages. “The Plaintiffs seek to recover, for the benefit of FTX’s creditors, at least $1.76 billion that was fraudulently transferred to Binance and its executives,” the FTX estate administrators stated.
Binance Denies the Allegations
In response to the filing, Binance dismissed the claims as baseless. “The claims are meritless, and we will vigorously defend ourselves,” a Binance spokesperson stated. Zhao, who is often known by his initials “CZ,” has yet to provide additional comments.
This lawsuit represents the latest legal confrontation between the two cryptocurrency powerhouses, following FTX’s collapse in 2022.
FTX’s Collapse and Bankman-Fried’s Downfall
Once among the world’s top cryptocurrency firms, FTX’s dramatic collapse in November 2022 shocked the crypto industry. With bankruptcy imminent, Binance initially offered to purchase FTX’s non-U.S. operations, but the deal quickly fell apart as the scope of FTX’s financial troubles became clear.
Earlier this year, FTX’s founder, Sam Bankman-Fried, was sentenced to 25 years in prison for embezzling $8 billion from FTX clients. He has since appealed the conviction. Meanwhile, Zhao faced his own legal consequences, receiving a four-month prison sentence for violating U.S. anti-money laundering laws through Binance’s operations.
The Legal Fallout in the Crypto Sector
The lawsuit against Binance is only the latest ripple effect from FTX’s downfall, which has led to a series of legal disputes across the crypto landscape. Binance, now the world’s largest cryptocurrency exchange, remains under scrutiny from global regulators, while the FTX estate works to reclaim lost funds for creditors and investors.
