FTX Derivatives Exchange has made a legal move against Binance and co-founder CZ over alleged involvement in its collapse
In what has become an epic retrieval battle, defunct cryptocurrency exchange FTX has again gone to court. This time, FTX has sued Binance, the world’s leading cryptocurrency exchange, and its former CEO, Changpeng ‘CZ’ Zhao. The lawsuit seeks to repossess approximately $1.8 from Binance.
Binance’s Alleged Role in FTX’s Downfall
As per FTX, the fund was part of a fraudulent transfer by its now-convicted co-founder, Sam Bankman-Fried. In the filing by FTX’s legal estate, Binance, Zhao, and other top Binance executives received the funds as part of a shares repurchase deal in July 2021. In the transaction, Bankman-Fried sold stakes in FTX’s international unit and U.S.-based entity worth 20% and 18.4%, respectively.
The lawsuit also claimed that in July 2021, Bankman-Fried’s payment for the repurchase comprised FTT, the FTX’s exchange token, and Binance-branded coins BNB and BUSD. The worth of this mix of payments totaled $1.76 billion as of then.
The legal team claimed that FTX might have been bankrupt from inception and had already fallen into balance-sheet bankruptcy as of early 2021, before the deal in July. This suggests that the lawyers will argue for the refund based on the premise that FTX could not have funded the deal while already insolvent.
Another point of the filing against Binance concerns “malicious communication” targeted at destroying FTX. The lawyers alleged that Binance’s former CEO, Zhao, engaged in a series of misleading, false tweets just before the collapse of FTX. Notably, a November 6, 2022 tweet by Zhao stated that Binance planned to sell its FTT tokens, which were valued at $529 million then.
According to the filing, Zhao’s tweet triggered massive withdrawals from FTX. However, Zhao responded to the allegation in a post on his X (Twitter) handle in 2022. The former Binance CEO countered the claims, maintaining that a single tweet cannot destroy a healthy business. He also suggested what could have caused the FTT dump.
Parallel Lawsuits Aim to Recover Millions for FTX’s Estate
In an earlier BGECrypto report, FTX filed a similar lawsuit against Anthony Scaramucci, CEO of SkyBridge Capital. In the filing, FTX alleged that Scaramucci and SkyBridge failed to conduct proper background checks before accepting huge investments from Bankman-Fried. It accused Sky Bridge of profiting from a “no-question-asked” investment even when they, as seasoned investors, ought to know better.
Now, the FTX estate seeks to recover over $100 million from Scaramucci and SkyBridge. Additionally, the estate claimed that Scaramucci’s SALT conference received sponsorship from Bankman-Fried for $12 million. They consider this wasteful spending and demand a refund.
Meanwhile, Gary Wang, a former FTX Executive, has appealed through his lawyers for pardon by the court. Wang, who admitted to writing parts of the code for the defunct FTX exchange, claimed his lack of awareness of fraudulent activities by Bankman-Fried.
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