Cash News
Collapsed cryptocurrency company FTX is suing Binance and its former CEO Changpeng Zhao, alleging that $1.8-billion was “fraudulently transferred” by FTX management to Binance and its executives.
The lawsuit relates to Binance’s sale of its stake in Sam Bankman-Fried’s FTX, which it acquired in 2019 but then negotiated to sell back to FTX in July 2021.
According to the lawsuit, FTX’s Alameda Research division directly funded the share repurchase using tokens which had a then fair market value of $1.76-billion. Alameda, the lawsuit alleges, was insolvent at the time of buying the shares and could not therefore afford to fund the transaction and it should not have been allowed to proceed.
“By this lawsuit, the Plaintiffs seek to recover, for the benefit of FTX’s creditors, at least $1.76-billion that was fraudulently transferred to Binance and its executives at the FTX creditors’ expense, as well as compensatory and punitive damages to be determined at trial,” the administrators for the FTX estate said in a filing made on Sunday in the U.S. state of Delaware.
A Binance spokesperson said: “The claims are meritless, and we will vigorously defend ourselves.”
Zhao, known as “CZ,” could not immediately be reached for comment.
The lawsuit is the latest battle between FTX and Binance.
FTX was one of the largest cryptocurrency firms in the world before it collapsed in late 2022.
Arch-rival Binance, then led by Zhao, was set to come to its rescue and buy FTX’s non-U.S. unit as it struggled to stay afloat in November 2022, before Binance withdrew its offer.
FTX founder Bankman-Fried was sentenced in March this year to 25 years in prison for stealing $8-billion from customers. He has appealed the conviction.
Zhao was sentenced to four months in prison earlier this year, after pleading guilty to violating U.S. laws against money laundering at the world’s largest cryptocurrency exchange.