FTX Files Lawsuit Against Binance and CZ Over Alleged Fraudulent Share Buyback
FTX has filed a lawsuit against Binance Holdings and its former CEO, Changpeng “CZ” Zhao, alleging fraudulent actions in a 2021 share buyback agreement involving FTX’s founder, Sam Bankman-Fried. The lawsuit, reported by Bloomberg on November 11, claims Binance and CZ received $1.76 billion as part of the deal.
Allegations of Fraudulent Transactions
The lawsuit alleges that Bankman-Fried initiated the buyback in July 2021, repurchasing approximately 20% of FTX’s stake in its international branch and 18.4% in its U.S. subsidiary. The payment reportedly included FTX’s native token (FTT) and Binance’s tokens (BNB and BUSD).
FTX now contends that the transaction was fraudulent, as both FTX and its sister firm, Alameda Research, were “balance-sheet insolvent” at the time. The legal filing argues that the repurchase should not have occurred due to the financial instability of both entities.
Accusations of Malicious Intent by CZ
The lawsuit also accuses CZ of intentionally undermining FTX during its collapse in November 2022. Specifically, it highlights a tweet in which CZ announced Binance’s decision to sell $529 million worth of FTT tokens. FTX claims this tweet triggered a massive withdrawal wave as customers panicked, ultimately accelerating FTX’s downfall. FTX’s legal team describes the tweets as “maliciously calculated” to harm a competitor.
Binance has not yet provided an official comment on the lawsuit.
Broader Legal Context
This lawsuit is part of a broader effort by FTX to recover funds for its creditors. Since filing for bankruptcy, FTX has launched multiple lawsuits against former investors, affiliates, and clients. These include cases against:
- Anthony Scaramucci and his hedge fund, SkyBridge Capital
- Crypto.com, a major digital-asset exchange
- FWD.US, a political advocacy group
In a related case, Alameda Research, an FTX-affiliated hedge fund, is suing Sasha Ivanov, founder of Waves, for $90 million in cryptocurrency.
Key Figures and Developments
- Changpeng “CZ” Zhao: CZ has recently returned to public appearances following a four-month prison sentence. He has yet to respond publicly to the lawsuit.
- Sam Bankman-Fried: Bankman-Fried is currently serving a 25-year sentence in federal prison. His legal team is appealing the conviction, arguing judicial bias.
Implications for the Crypto Industry
The lawsuit highlights ongoing tensions and legal battles within the cryptocurrency industry as major players navigate the fallout from FTX’s collapse. FTX’s aggressive legal strategy reflects its effort to recover assets amid mounting pressure from creditors. The case against Binance adds to the scrutiny facing the global crypto exchange, potentially affecting its operations and reputation in the competitive cryptocurrency landscape.