The bankruptcy estate of the defunct cryptocurrency exchange FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao, as it intensifies efforts to recover assets amid a complex and high-profile bankruptcy process.
The lawsuit, lodged on November 10, seeks to reclaim nearly $1.8 billion, which the FTX estate claims was transferred improperly to Binance and its executives.
At the center of the case is a 2021 share repurchase agreement, in which FTX co-founder Sam Bankman-Fried, now serving a 25-year prison sentence, repurchased stakes from Binance in both FTX’s international division and its U.S. affiliate, West Realm Shires Services, which operates as FTX US.
This transaction involved the transfer of an approximately 20% stake in FTX’s global unit and 18.4% in FTX US to Binance. The plaintiffs argue that Bankman-Fried used a combination of FTX’s native token (FTT), Binance Coin (BNB), and Binance USD (BUSD) to facilitate the buyout, collectively valued at $1.76 billion at the time.
- In its complaint, the FTX estate contends that both FTX and Alameda Research, its sister trading arm, were insolvent as early as 2021, rendering the repurchase transaction effectively fraudulent. The filing suggests that the cryptocurrency empire Bankman-Fried constructed was financially unsound from the outset, citing evidence of balance-sheet insolvency during the transaction period.
- The lawsuit adds to a series of legal actions taken by the FTX estate in its bid to recoup assets for creditors who suffered extensive losses when FTX collapsed in November 2022. This specific filing further underscores the FTX estate’s strategy to claw back funds that it claims were inappropriately diverted during Bankman-Fried’s management. Since filing for bankruptcy, the estate has pursued numerous legal actions aimed at recovering assets distributed to a range of entities, from crypto firms to individual executives involved with the exchange.
- Binance has yet to respond to the claims, and a representative for Zhao has declined to comment on the latest development. The outcome of this lawsuit could have significant repercussions within the crypto sector, especially regarding governance and financial transactions among major exchanges.
The FTX estate’s legal efforts are part of broader industry shifts that have seen greater regulatory scrutiny of cryptocurrency exchanges and a push for transparency and accountability in digital asset management. With multiple ongoing lawsuits, the FTX case continues to reveal complexities in financial practices within the cryptocurrency space, spotlighting industry practices that some regulators argue may necessitate stricter oversight.