Failed Cryptocurrency Exchange FTX Files $1.8B Lawsuit Against Rival Binance

Defunct crypto exchange FTX is suing Binance and its former CEO Changpeng Zhao for $1.76 billion. According to the lawsuit, Binance, Zhao, and other executives allegedly took part in a “fraudulent” share scheme to “destroy” FTX.

Reportedly, Binance sold its $1.76 billion stake in FTX in July 2021. Binance supposedly transferred its 18.4% share of FTX’s U.S. unit, West Realm Shires, and its 20% stake in FTX’s international unit back to the company.

FTX co-founder Sam Bankman-Fried allegedly authorized the deal. Purportedly, it was funded through a company named Alameda Research using a mix of FTX and Binance-branded cryptocurrencies. Due to deep financial trouble with both FTX and Alameda at that time, the FTX estate lawsuit claims the deal should have never happened.

“Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction,” the suit states, per CNBC.

The Downfall of FTX

Also, part of the lawsuit alleges that Zhao used social media to post several malicious messages with the intention to damage FTX. On X, Zhao stated that Binance was about to sell $529 million worth of FTX cryptocurrency (FTT tokens). In a separate post, Zhao later said Binance was liquating its remaining FTT coins.

Purportedly, the tweets caused a flood of withdrawals, ultimately leading to FTX’s failure. The crypto exchange ended up filing for bankruptcy, and Bankman-Fried was sent to prison for seven counts of criminal fraud.

Not long after Bankman-Fried’s conviction, Zhao was accused of violating the Bank Secrecy Act. Allegedly, he breached U.S. economic sanctions and did not have an effective anti-money-laundering program in place.

In response to the FTX estate lawsuit, Binance stated the lawsuit is “meritless” and intends to fight the case. This recent suit is currently one of 20 filed by FTX in an attempt to get billions of dollars back from various defendants.

The lawsuit comes as cryptocurrencies like Bitcoin are experiencing record-setting values. With Donald Trump’s support for the cryptocurrency market alongside his recent win in the presidential election, investors are likely anticipating a bullish market on the horizon and a looser regulatory environment under a new administration.