Bankrupt Crypto Exchange FTX Sues Binance, Ex-CEO Zhao, Seeking $1.8 Billion

Future Exchange (FTX), the bankrupt cryptocurrency exchange, has filed a lawsuit against Binance Holdings Ltd. and its former CEO, Changpeng Zhao

Bankrupt cryptocurrency exchange Future Exchange (FTX) has filed a lawsuit against Binance Holdings Ltd. and its former CEO, Changpeng Zhao, seeking nearly $1.8 billion in damages.

The lawsuit, filed by the FTX estate on Monday in a Delaware bankruptcy court, alleges that a fraudulent transaction occurred in a share repurchase deal in July 2021. The transaction saw FTX repurchase Binance's 20% stake in its international operations and 18.4% stake in its U.S.-based affiliate, West Realm Shires (WRS).

According to the filing, Binance acquired a stake in FTX in November 2019 using 1,002,739 BNB tokens. The investment was later expanded in 2020 to include WRS for $2. However, Binance withdrew from the investment in 2021 as tensions escalated between Zhao and Bankman-Fried.

The share repurchase transaction, which was valued at $1.76 billion, was funded using Binance's stablecoin, BUSD, and FTX's native token, BNB. However, FTX is now disputing the validity of the transaction, alleging that Alameda was insolvent at the Caroline Ellison, the former CEO of Alameda Research, testified that she had warned Bankman-Fried that the funds were insufficient. She added that the buyback was ultimately financed by about $1 billion in depositor funds from FTX.

Binance has denied the allegations, calling them "meritless" and vowing to defend itself against them. The lawsuit is part of FTX's ongoing efforts to recover assets lost in the aftermath of its collapse. The exchange is seeking to assign blame for what it alleges was mismanagement and dubious dealings with major industry players.

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