The assets of FTX have filed a lawsuit against rival firm Binance and its former CEO Changpeng Zhao in an attempt to recover approximately $1.8 billion linked to an alleged “fraudulent” trade made by Sam Bankman-Fried.
The filing was made in Delaware bankruptcy court on Sunday, trial The focus centers on a 2021 share repurchase deal between Bankman-Fried – who is currently in prison for fraud – and key Binance executives.
Zhao and his partners sold about 20% of FTX’s international business and an 18.4% stake in the US-based affiliate in exchange for a large sum of cryptocurrency, worth $1.76 billion at the time.
The caretakers of now-defunct FTX are alleging that the company and its doomed sister cryptocurrency firm Alameda Research “could be insolvent from the beginning and certainly balance-sheet insolvent by early 2021” – meaning the shares. The buyback deal was fundamentally fraudulent.
The lawsuit further alleges that Zhao planned to “destroy” FTX after selling his equity stake – in part by posting a series of “false, misleading and fraudulent tweets that were maliciously calculated.” resulting in the collapse of the firm.
“Zhao’s false tweets triggered a predictable avalanche of withdrawals on FTX – a cosmic action on the bank that Zhao knew would cause FTX to collapse,” the lawsuit says.
Binance rejected the lawsuit’s allegations.
“The claims are baseless, and we will vigorously defend ourselves,” a Binance spokesperson said in a statement.
A high-flying cryptocurrency firm once valued at $32 billion, FTX went bankrupt in November 2022. It was later revealed that Bankman-Fried stole billions of dollars from clients’ funds in order to promote risky bets placed by Alameda.
As stated in the lawsuit, FTX’s meltdown began when CoinDesk published an article revealing that Alameda Research had invested heavily in FTT – a cryptocurrency token issued by FTX itself.
The lawsuit cites several tweets from Zhao that were allegedly aimed at spreading panic about this revelation, including a post from November 6, 2022, in which he recommended dumping his own holdings in FTT tokens. Binance’s decision was described. As in “risk management just after the exit”.
“Zhao’s intent was to maximize market influence and cause the price of FTT to decline, thereby hurting FTX and increasing Binance’s market share,” the lawsuit says.
Bankman-Fried sentenced to 25 years in prison For his role in the collapse of FTX last March.
Separately, Zhao was released from prison in September after serving a four-month sentence for violating US laws against money laundering.
Prosecutors had said that Binance, under Zhao’s leadership, had failed to report suspicious crypto transactions by terrorist groups such as Hamas and al-Qaeda. Binance agreed to pay a fine of $4.32 billion as part of the case.
Zhao has since stepped down as CEO of Binance but remains its majority shareholder.
with post wires
