Infamous cryptocurrency exchange FTX has filed a lawsuit against another cryptocurrency exchange giant, Binance, and its former CEO Changpeng Zhao, seeking to recover at least $1.76 billion in funds allegedly fraudulently transferred during a 2021 deal.
What is the meaning: The legal action emphasizes the ongoing financial fallout from the FTX collapse, highlighting potential malpractices and legal battles involving major crypto players.
Key details: The lawsuit is part of an overall effort to recover funds for FTX’s creditors, as the exchange’s bankruptcy proceedings continue to reveal complex financial mismanagement and conflicts with Binance and other entities.
- The lawsuit alleges that FTX founder Sam Bankman-Fried transferred $1.76 billion in cryptocurrency to Binance in July 2021, as part of an agreement to buy back Binance’s shareholding.
- It also claims that the buyback deal was hastily made and fraudulent, with Zhao allegedly using leverage to extract billions from a struggling FTX, noting that the shares were considered worthless when the transaction took place.
- Alleged sabotage: The lawsuit then accuses Zhao of attempting to harm FTX’s operations after selling his stake and orchestrating a campaign to discredit the exchange, although these allegations have yet to be tested in court.
Binance connection with FTX on a timeline:
- According to FTX, Binance acquired a 20% stake in the exchange in 2019, but tensions rose when FTX became a major competitor to Binance.
- By mid-2021, Binance had decided to exit its 20% stake, and FTX reportedly transferred $1.76 billion worth of cryptocurrencies, including $FTT, $BNB, and $BUSD, as part of the deal.
- In 2022, Binance’s tweets about FTX’s financial situation, including the repurchase agreement and intentions to sell $FTT, led to a massive withdrawal of funds from FTX.
- From November 6 to 7, 2022, FTX recorded around $6 billion in withdrawals, exacerbating its liquidity crisis and contributing to its collapse.
- It can be recalled that Binance eventually abandoned the offer because “the problems are beyond our control or our ability to help.”
- Respectively: The lawsuit also alleges that Binance used tweets to prevent FTX from obtaining alternative financing.
On the other hand: FTX and Alameda have also filed lawsuits against the following individuals and entities:
- Anthony Scaramucci and SkyBridge Capital: The lawsuit aims to recover more than $100 million, alleging that investments made in 2022 were used to improve Bankman-Fried’s position without adding value.
- hump the whale: The lawsuit is for $1 billion in losses due to alleged market manipulation and ties to organized crime.
- Aleksandr Ivanov, founder of Waves: Seeks to recover $90 million in assets, accusing him of manipulating the value of $WAVES, diverting funds from Vires.Finance, and attempting to extort Alameda.
- Crypto.com: The lawsuit aims to recover more than $11 million from an account allegedly controlled by Alameda Research, claiming the funds belong to FTX creditors and accusing Crypto.com of blocking access to the assets.
what to look at: Legal proceedings, especially if the lawsuit can successfully recover the funds and hold Binance and other entities accountable.
worth reading: Although Binance and Zhao have yet to issue statements, the former Binance CEO denied any conspiracy against FTX in 2022 and explained that his actions, such as liquidating FTX tokens, were simply part of risk management, not a move directed against the competitor.
This article is published on BitPinas: FTX sues Binance and CZ for $1.76 billion over alleged fraudulent deal
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