- In a Sunday filing with a Delaware court, FTX cites a 2021 transaction in which Binance, Zhao and others exited their investment in FTX, selling a 20% stake in the platform and a 18.4% stake in its U.S.-based entity West Realm Shires back to the company.
- "Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction," the suit claims, labeling the deal a "constructive fraudulent transfer."
- "The claims are meritless, and we will vigorously defend ourselves," a Binance spokesperson told CNBC in an emailed statement.
The estate of collapsed crypto exchange FTX has filed a suit against Binance and its former CEO Changpeng Zhao in an effort to wrest back at least $1.76 billion, citing a "fraudulent" share deal.
In a Sunday filing with a Delaware court, FTX cites a 2021 transaction in which Binance, Zhao and others exited their investment in FTX, selling a 20% stake in the platform and a 18.4% stake in its U.S.-based entity West Realm Shires back to the company.
The FTX estate alleges that the share repurchase was funded by FTX's Alameda Research division through a combination of the company's and Binance's exchange tokens, as well as Binance's dollar-pegged stablecoin.
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"Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction," the suit claims, labeling the deal agreed with FTX co-founder Sam Bankman-Fried — who's now serving a 25-year sentence over fraud linked to the downfall of his exchange — a "constructive fraudulent transfer."
Binance denies the allegations, saying in an emailed statement, "The claims are meritless, and we will vigorously defend ourselves."
The litigation marks the latest escalation of tensions between two of the biggest names in the crypto space, after the meteoric collapse of FTX rocked the industry.
Money Report
Once a $32 billion empire, FTX disintegrated into bankruptcy when it was unable to keep pace with a torrent of customer withdrawals, triggering a plunge in the crypto markets.
The market fallout peaked in November last year, when Bankman-Fried was found guilty of seven criminal fraud counts relating to the bankruptcy of the exchange and theft of customer funds. That same month, Binance's Zhao pleaded guilty to charges of violating the Bank Secrecy Act for failing to put in motion an effective anti-money-laundering program and for breaching U.S. economic sanctions.
In addition to recovering funds, the latest lawsuit also accuses Zhao of "a series of false, misleading and fraudulent tweets" that it alleges "triggered a predictable avalanche of withdrawals at FTX," eventually leading to the exchange's collapse.
The suit cited a Nov. 6 post on X in which Zhao said, with reference to FTX token FTT: "Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won't pretend to make love after divorce."
In another post cited, he said: "As part of Binance's exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books."
