After FTX founder, Sam Bankman-Fried, received charges against a billion-dollar fraud scheme, the ill-starred company is turning the tables against Binance.
Besides Binance, the defendant also includes its former CEO, Changpeng Zhao. The lawsuit will seek to recover at least $1.8 billion as well.
FTX Sues Binance and Zhao
As detailed by CNBC, the legal battle stemmed from a 2021 transaction that FTX calls a "constructive fraudulent transfer." Allegedly, Binance's Zhao and others sold a 20% stake in FTX, and an 18% stake in its US entity called West Realm Shires, back to FTX. However, the fallen crypto exchange company claims the deal was fraudulent since it was funded by FTX's Alameda Research Division, which was already insolvent at the time and could not afford to complete the transaction.
FTX also indicated that the deal was made in bad faith since it was detrimental to FTX's financial health. The company also argued that Alameda and BInance used company tokens and a stablecoin to fund the repurchase, which was an improper use of FTX funds.
The lawsuit also points to statements made by Zhao, accusing him of inciting a series of events that led to a mass withdrawal of funds from FTX. One post from November 6, 2022, in which Zhao mentioned liquidating Binance's holdings in FTX, triggered the collapse, per Times of India.
Now, Binance has rejected the accusation and called FTX's claims "meritless" and would defend themselves vigorously should the two meet in court.
Currently, both companies face mounting public scrutiny. FTX still faces fraud charges, a series of scandals, and multiple customer withdrawals, which dropped its brand value from $32 billion. Binance, on the other hand, was accused of alleged misconduct in its compliance practices and operational structure without proper oversight that contributed to the facilitation of illegal transactions.
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