- FTX has rekindled its long-standing tussle with Binance.
- The exchange is seeking to recover billions through a legal bid.
- The dispute between the two has persisted for years.
Over the past year, the broader part of the now-defunct exchange FTXโs operations has been marked by legal tussles from left, right, and center. Through a series of aggressive litigations, the exchange has gone after several individuals and entities in the courtroom, particularly amid efforts to recoup the staggering $11 million lost in its downfall.
Continuing the trend, FTX has now set its sights on a new target.
FTX Drags Binance and CZ to Court
Following several successful payouts from some of its boldest litigations, FTX is now going after Binance and its former CEO Changpeng Zhao (CZ). According to a recently filed lawsuit, the FTX bankruptcy estate is seeking to recover a staggering $1.76 billion from the defendants.
Sponsored
At the heart of the dispute lies a transaction from over three years ago. As some of FTX’s earliest investors, Binance and some of its executives purchased and held a significant stake in the company. However, in July 2021, these entities sold nearly their entire holdings, recouping about $2.1 billion from the then-CEO Sam Bankman-Fried (SBF).
FTXโs bankruptcy estate argues that the funds used for this sale were “secretly and unlawfully” sourced from customer deposits by SBF, pointing out that the transaction should have been impossible given the exchange’s financial instability at the time.
The exchange added that both FTX and its sister hedge fund, Alameda Research may have been insolvent from the outset and certainly were balance-sheet insolvent by early 2021, solidifying its claim that the deal between FTX and Binance was fundamentally flawed.
However, the sale of the stake is not the only point of contention. The lawsuit included further allegations, claiming that Binance’s former CEO, Changpeng Zhao, played a major role in triggering the collapse of FTX.
โZhao Set Out to Destroyโ FTX
According to the lawsuit, Changpeng Zhao, following the divestment of his equity stake, deliberately orchestrated the destruction of FTX.
Building on past allegations and credit of Binance as one of the causes of the FTX implosion, the lawsuit alleged that Zhao, recognizing FTX as a growing threat to Binance’s market dominance, took several damaging steps aimed at crushing its competitor.
โZhao sent a series of false, misleading, and fraudulent tweets, maliciously calculated to destroy FTX, with reckless disregard for the harm that FTXโs customers and creditors would suffer,โ read the filing.
The malicious tweets allegedly triggered a cascade of withdrawals from the exchange, ultimately contributing to the notorious crash. By its claims, the firm is now seeking to hold Binance and its former CEO accountable for their actions, and recover lost funds to secure compensation for creditors.
On the Flipside
- Binance is only one of the crypto exchanges FTX has sued, and the firm successfully clawed a $953 million payout from another target, Bybit.
- Former FTX CEO Bankman-Fried is currently serving a 25-year jail term.
- Four of the FTX fraud perpetrators have been sentenced for their various roles in the exchange’s crash.
Why This Matters
Despite the weight of the allegations in the lawsuit, it remains uncertain whether FTX will successfully recover the funds it seeks from Binance. However, a potential victory could not only bolster FTXโs financial recovery but also increase the chances of a timely settlement for its creditors.
Read this article to learn about other lawsuits by FTX and its win against one of its former executives:
SBFโs Caroline Ellison to Forfeit Life Assets in FTX Settlement
Find out about defunct crypto exchange Mt.Goxโs latest Bitcoin movements here:
Mt.Gox Ramps Up Portfolio Shake-Up Amid BTCโs ATH Surge
