FTX is going after Binance for nearly $1.8 billion in damages caused due to a fraudulent transaction and CZ’s efforts to drive it into the ground.
The estate handling defunct exchange FTX’s bankruptcy has filed suit against the biggest crypto exchange by spot trading volume, Binance, and its co-founder Changpeng ‘CZ’ Zhao. FTX’s bankruptcy estate wants to recover $1.8 billion from Binance, which it says was given to Binance through a fraudulent transaction conducted by ex-FTX CEO Sam Bankman-Fried.
Fried is now serving a 25-year prison sentence due to the role he played in leading the exchange to the ground and swindling billions of investor dollars in the process. FTX’s complaint filed with the United States Bankruptcy Court for the State of Delaware stated, “Because of its insolvency, the Debtor Plaintiff’s July 2021 transfer of at least $1.76 billion worth of cryptocurrency to its equity holder Binance and certain Binance executives, in the form of a share repurchase, was a constructive fraudulent transfer.”
That alleged fraudulent transaction occurred when Bankman-Fried repurchased equity in 2021, which was previously sold to Binance. He had initially sold 20% of FTX International’s stocks and 18.4% of FTX US. He spent $1.76 billion while acquiring them back from Binance, with the value transferred via crypto. Specifically, Binance Smart Chain’s native token, BNB, and the exchange’s now halted stablecoin, Binance USD (BUSD).
The filing mentioned that FTX and Alameda were insolvent by early 2021, making this deal fraudulent. “Indeed, in large part due to such fraud, FTX Trading was also insolvent at the time of the Binance share repurchase, which closed on July 21, 2021,” it said. “In other words, the FTX Trading shares acquired through the share repurchase were actually worthless based on a proper accounting of FTX Trading’s assets and liabilities.”
CZ and Bankman-Fried Were at War With Each Other
“Having divested himself of his equity stake in his rival FTX, Zhao then set out to destroy his now-unaffiliated competitor,” it then alleged. The filing centers Zhao carrying out a campaign to undermine FTX’s position in the market and grow Binance’s share. Reports have emerged of Bankman-Fried and Zhao being at war with each other to run the other’s exchange out of business.
It further explained that CZ, liquidating Binance’s share of FTT tokens in November 2022 as the FTX exchange imploded, was done in a way that did not minimize market impact. Instead, it alleged that he did it to ensure FTT prices tanked, taking FTX down with it. “By the time Zhao sent the first tweet in the Nov. 6 tweet thread, Binance had apparently already sold a massive amount of FTT in a single trade.”
The FTX bankruptcy estate has filed several complaints this month and the last against crypto platforms owing its funds. They include KuCoin, Crypto.com, Skybridge Capital, and now Binance.
