FTX Sues Binance and CZ for $1.8B Over Alleged Fraudulent Transfer

FTX has filed a lawsuit against Binance Holdings and its former CEO Changpeng Zhao, known as CZ, seeking $1.76 billion over a controversial share repurchase deal allegedly arranged by FTX’s Sam Bankman-Fried in July 2021. According to Bloomberg, the deal involved Bankman-Fried selling approximately 20% of FTX’s international shares and 18.4% of its U.S.-based branch stakes to Binance, funded largely by FTX’s FTT tokens and Binance-issued BUSD and BNB coins.

FTX’s legal team argues that this transaction was fraudulent, contending that FTX and its affiliated hedge fund, Alameda Research, were “balance-sheet insolvent” at the time. The estate claims that Bankman-Fried’s transfer of these funds was misrepresented and financially unsustainable, thereby constituting fraud.

In addition, the lawsuit targets CZ personally for allegedly posting misleading tweets that FTX claims exacerbated its financial collapse. FTX’s legal filing highlights a specific November 2022 tweet from Zhao, where he announced Binance’s intent to sell $529 million in FTT tokens. This tweet reportedly led to mass withdrawals from FTX by concerned traders, accelerating the exchange’s decline.

While Binance has not commented on these allegations, the former CEO CZ has been active in the cryptocurrency space since his release from a four-month sentence in September. Meanwhile, Bankman-Fried, who is serving a 25-year federal sentence, is appealing the conviction, with his legal team arguing that the initial ruling was biased.

This lawsuit adds to a wave of litigation from FTX, which has filed over 23 lawsuits against various former investors and affiliates in efforts to recoup funds for creditors. The plaintiffs include SkyBridge Capital founder Anthony Scaramucci, digital-asset exchange Crypto.com, and political advocacy groups such as FWD.US. Additionally, Alameda Research, FTX’s sister company, has sued Waves founder Sasha Ivanov for $90 million in cryptocurrency assets.

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