FTX has filed a large claim against Binance, stating that Binance fraudulently transferred roughly $1.8 billion when going through bankruptcy. The document filed on November 10th reveals that Binance and CZ, along with other executives, received fraudulent transactions of at least $1.76 billion worth of cryptocurrency from FTX. This legal action forms one of the many lawsuits to realize the highest possible recovery for the defunct exchange's creditors.
The lawsuit centers around a share repurchase agreement from July 2021, which FTX claims was fraudulent due to its insolvency. Sam Bankman-Fried, FTX CEO, used a mix of FTX's token (FTT), Binance's BNB, and Binance USD (BUSD) to fund the deal, valued at $1.76 billion.
The filing also states that FTX and its partner company, Alameda Research, were already insolvent by early 2021, so the transaction constituted fraud. The complaint also added that approximately $1 billion in customer deposits was used to fund the purchase, even though it was made known that FTX lacked adequate funds. The plaintiffs accused FTX of this action of giving the market a wrong impression of FTX's stability, which led to its collapse.
FTX's estate also accuses Binance and Zhao of playing a crucial role in the exchange's downfall. The lawsuit highlights a series of tweets from Zhao in November 2022, allegedly triggering a market panic, leading to a bank run on FTX. According to the filing, Binance's announcement to liquidate its FTT holdings caused a significant market disruption, undermining FTX's ability to secure alternative financing.
The lawsuit suggests that Binance's actions, including withdrawing from a potential acquisition of FTX, intensified the panic and led directly to the platform's collapse.
Binance has dismissed the allegations, saying that they are baseless. The exchange's representative also noted that it would not hesitate to fight the lawsuit against it. However, the legal fight between the two exchanges is still ongoing, and FTX has not stopped its efforts in the Delaware bankruptcy court. This latest action merely adds to the total of lawsuits, with legal actions against other key participants in FTX's operations.