FTX Sues Binance and Former CEO Zhao Over $1.8 Billion in Alleged Fraudulent Transfers
FTX has filed a lawsuit against Binance and its former CEO, ChangPeng Zhao, in an effort to recover nearly $1.8 billion that it claims was fraudulently transferred during a share transaction. The legal action, initiated by the estate of the now-defunct crypto exchange, accuses former FTX CEO Sam Bankman-Fried of facilitating the transfer of funds to Binance and its executives. Filed in a Delaware court, FTX contends that the funds were tied to a July 2021 share buyback agreement.
In 2021, FTX orchestrated a share buyback where Binance divested its 20% ownership in FTX and an 18.4% stake in FTX’s U.S. subsidiary. According to the lawsuit, this deal was financed through Alameda Research—FTX’s affiliated trading firm—using a combination of FTX’s native token (FTT), Binance’s BNB coins, and Binance’s stablecoin. FTX claims this transaction was a “constructive fraudulent transfer,” asserting that both FTX and Alameda may have been financially insolvent at the time. By early 2021, FTX alleges that its finances were so compromised that it could not sustain the buyback deal.
Binance has rejected FTX’s claims, describing them as baseless. Binance stated it will present a strong defense against the allegations.
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The estate further accuses Zhao of contributing to FTX’s collapse through alleged “false, misleading, and fraudulent” statements. On November 6, 2022, Zhao tweeted that Binance would liquidate its holdings of FTT tokens, which were worth over $500 million. This announcement sparked panic, prompting customers to rush to withdraw funds from FTX. The estate asserts these actions were “maliciously designed to undermine his competitor,” accelerating FTX’s financial downfall.
This lawsuit forms part of a larger strategy by the FTX estate to recoup assets for bankruptcy proceedings. Other legal actions have been directed at entities like the cryptocurrency exchange Crypto.com and former White House communications officer and hedge fund manager Anthony Scaramucci.
After a spike in customer withdrawals, FTX filed for bankruptcy in late 2022, which ignited several civil and criminal investigations. A year later, Bankman-Fried was sentenced to 25 years in prison, with U.S. Attorney Damian Williams calling the case “one of the biggest financial frauds in American history.”
