FTX files $1.8 billion lawsuit against Binance and former CEO over fraudulent transfer

FTX, the defunct cryptocurrency exchange, has filed a lawsuit against Binance and its former CEO Changpeng Zhao in an attempt to recover nearly $1.8 billion that it claims was fraudulently transferred. The lawsuit alleges that the funds were part of a share repurchase deal with Sam Bankman-Fried, co-founder of FTX, who is currently serving a 25-year prison sentence.

The transaction involved the sale of stakes in FTX's international unit and its US-based entity to Binance executives, including Zhao. Payment for the stock repurchase was made using a combination of FTX's FTT token and Binance-branded coins valued at $1.76 billion at the time. The filing from the FTX estate suggests that both FTX and its sister trading house Alameda Research were potentially insolvent from early on, making the share repurchase deal fraudulent.

In addition to the financial aspects of the case, FTX also accuses Zhao of engaging in a campaign to undermine FTX through false and misleading tweets. The lawsuit claims that Zhao's actions were "maliciously calculated" to harm his rival FTX, citing instances where Binance allegedly engaged in fear, uncertainty, and doubt (FUD) campaigns against FTX.

Binance has denied the allegations, stating that the claims are meritless and that they will vigorously defend themselves. The outcome of this lawsuit could have significant implications for governance and financial transactions within the cryptocurrency sector, as it sheds light on complex practices and interactions between major exchanges.

This lawsuit is one of many legal actions taken by the FTX estate to recover assets for creditors following FTX's collapse in November 2022. The ongoing legal battles highlight the challenges and complexities faced by the industry, particularly regarding regulatory scrutiny, transparency, and financial accountability within the digital asset management space.

As the case unfolds in the bankruptcy court of Delaware, the FTX lawsuit against Binance and Zhao serves as a stark example of the high-stakes disputes that can arise in the rapidly evolving world of cryptocurrency. With billions of dollars at stake, the outcome of this legal confrontation could have far-reaching consequences for the parties involved and the broader landscape of cryptocurrency exchanges.