The estate of the collapsed crypto exchange FTX has filed a lawsuit against Binance and its former CEO Changpeng Zhao, seeking to recover nearly $1.8 billion that FTX claims was “fraudulently” transferred to Binance and its executives by Sam Bankman-Fried during a share transaction.
According to the lawsuit, filed in Delaware on Sunday, FTX alleges that Binance, Zhao, and other executives received these funds in a share repurchase deal in July 2021.
This deal involved Bankman-Fried facilitating the return of Binance’s 20% stake in FTX and its 18.4% stake in the U.S.-based subsidiary, back to FTX.
The deal was funded by Alameda Research, FTX’s sister company, using a mix of FTX’s FTT token, Binance’s BNB coins, and Binance’s stablecoin.
FTX claims the transaction was a “constructive fraudulent transfer” because both FTX and Alameda were insolvent or close to it by early 2021, making the deal unaffordable. Binance has denied the allegations, calling the claims meritless and stating they will defend themselves vigorously.
Additionally, the lawsuit references tweets from Zhao that allegedly contributed to FTX’s collapse. Specifically, Zhao’s November 2022 tweet announcing Binance’s plans to liquidate its FTT tokens, worth over $500 million at the time, sparked a panic that led to a wave of customer withdrawals from FTX.
This lawsuit is one of several the FTX estate has filed in an attempt to recover assets in bankruptcy court. Other legal actions have targeted Crypto.com and Anthony Scaramucci, a former White House communications officer turned crypto hedge fund operator.
After massive customer withdrawals, FTX filed for bankruptcy in late 2022, and Bankman-Fried was later sentenced to 25 years in prison for orchestrating what U.S. Attorney Damian Williams called “one of the biggest financial frauds in American history.”
