- The lawsuit relates to “fraudulent” share repurchases by FTX founder Bankman-Fried.
- Claimants say Binance sought to harm FTX with the fraudulent deal.
Collapsed crypto exchange FTX has sued Binance and its former CEO Changpeng Zhao, for the alleged fraudulent repurchase of shares by its former chief and founder, Sam Bankman-Fried.
In a Sunday filing, FTX refers to a July 2021 transaction in which Binance, Zhao, and others sold about 20% of their stake in FTX back to the company. Bankman-Fried is said to have negotiated to buy the stake using FTX’s token FTT, with Binance issuing crypto tokens BNB and BUSD worth around $1.76 billion.
The administrators of the FTX estate claim the repurchase deal should not have occurred. They stated that FTX and Bankman-Fried’s trading house, Alameda Research, “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021.” The filing in the District of Delaware stated:
“Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction.”
The administrators claim the FTT tokens were worthless, and thus, the transfer with the now-jailed founder, Bankman-Friend, was fraudulent.
See Related: Binance’s Founder Changpeng Zhao Released From US Prison
FTX now says Binance and Zhao sought to harm the rival through his actions, including falsified tweets that destroyed value that would be recoverable by FTX stakeholders. The crypto exchange filed for bankruptcy in November 2022 amid irregularities that also involved its trading firm, Alameda.
FTX founder Bankman-Fried was later imprisoned for 25 years. The impacts of the FTX clash caused severe market crashes, while more firms filed for bankruptcy. Binance has vowed to defend itself over the allegations, saying:
“The claims are meritless, and we will vigorously defend ourselves.”
