FTX sues Binance and its former CEO Zhao for $1.76B

FTX sues Binance and its former CEO Zhao for $1.

• Crypto exchange FTX sued Binance and CEO Changpeng Zhao for $1.8 million of a fraudulent share deal.
• FTX has initiated 36 adversary actions, with this case representing one of the largest claims against Binance.

What happened

FTX filed lawsuit aganist Binance and former CEO Changpeng Zhao claiming a “fraudulent” share purchase aim to recover at least 1.76 billion. The case was submitted to a Delaware court on November 11, 2024, and is part of ongoing efforts by FTX to recoup funds following its bankruptcy in late 2022.

In the court document, FTX references a 2021 deal in which Binance, Zhao, and other investors sold their shares in FTX, giving the business back an 18.4% stake in its U.S.-based subsidiary West Realm Shires and a 20% stake in the platform. FTX alleges that at the time of this buyback, Alameda Research (FTX’s trading firm) was financially unstable and lacked the means to finance the transaction, characterizing it as a “constructive fraudulent transfer”.

FTX also accuses Binance CEO Zhao of sending misleading tweets that ‘leads’ to the company’s collapse. Binance denies the allegations, saying “baseless” and stated that they will defend themselves.

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why it’s important

This lawsuit is one of many actions filed by FTX’s bankruptcy estate as it seeks to recover assets lost during its collapse. Since October 2024, FTX has initiated 36 adversary actions, with this case representing one of the largest claims against Binance. The outcome of this litigation could have significant implications for both companies and the broader cryptocurrency market, which has been under scrutiny following the high-profile collapse of FTX and subsequent legal challenges faced by its executives.

The case exemplifies broader issues within the cryptocurrency industry regarding governance, risk management, and accountability. It highlights how interconnected financial dealings can lead to significant repercussions not just for the companies involved but also for investors and customers relying on these platforms.