FTX is suing Binance Holdings and its former CEO Changpeng ‘CZ’ Zhao over an alleged fraudulent transaction involving a $1.76 billion shares repurchase orchestrated by Sam Bankman-Fried (SBF) in July 2021.
According to a Bloomberg report published on November 11, FTX claims that CZ and other Binance executives received the funds as part of a shares repurchase deal in which Bankman-Fried sold significant stakes in FTX’s international and U.S. subsidiaries. At the time, Bankman-Fried sold about 20% of FTX’s international unit and 18.4% of its U.S.-based branch. The deal, valued at approximately $1.76 billion, was paid for using a combination of FTX’s native token (FTT) and Binance-issued coins BSB and BUSD.
FTX Accuses Bankman-Fried of Fraudulent Transaction
FTX’s legal filing argues that the transaction was fraudulent because, by the time the deal was made, both FTX and its sister company Alameda Research were already “balance-sheet insolvent.” As a result, FTX alleges that Bankman-Fried’s transfer of funds to Binance was made in bad faith and intended to mislead stakeholders about the financial health of the company. The lawsuit claims that the shares repurchase deal was not a legitimate business transaction but a fraudulent attempt to prop up FTX’s financials during a period of insolvency.
Legal Action Against CZ Over Social Media Posts
In addition to the lawsuit over the repurchase deal, FTX is also suing CZ for what it describes as “false, misleading, and fraudulent tweets” in the days leading up to FTX’s collapse. FTX claims that these social media posts were strategically aimed at damaging the exchange’s reputation and causing its downfall.
One particularly controversial tweet came in November 2022, when CZ tweeted that Binance intended to sell off $529 million worth of FTT tokens. This announcement triggered a wave of withdrawals from FTX as panicked traders rushed to pull their funds, ultimately contributing to the exchange’s collapse. FTX claims that these actions were part of a broader campaign to undermine its operations.
Legal Battle Expands: 23 Lawsuits Filed
The lawsuit against Binance and CZ is just one of many legal actions FTX has filed since its bankruptcy. In total, FTX has launched around 23 lawsuits against former investors, partners, and clients in an effort to recover assets for creditors. Among the defendants are high-profile figures like former White House communications director Anthony Scaramucci and his hedge fund SkyBridge Capital, the digital-asset exchange Crypto.com, and political organizations such as FWD.US.
Additionally, FTX’s sister company, Alameda Research, has filed a separate lawsuit against Waves founder Sasha Ivanov, seeking $90 million worth of cryptocurrency in damages.
FTX’s Ongoing Legal Challenges
While Sam Bankman-Fried is currently serving a 25-year prison sentence for his role in the collapse of FTX, his legal team is challenging the verdict. They argue that the judge in his case was biased and presumed his guilt from the outset.
As for CZ, he was released from prison in September after serving a four-month sentence. Since his release, he has been making public appearances at cryptocurrency events and granting interviews.
In the meantime, FTX’s legal team continues to pursue its cases, hoping to recover assets and settle claims for creditors impacted by the exchange’s dramatic collapse.
