FTX Sues Binance Founder Changpeng Zhao in Bid to Recover $1.8 Billion

Key Takeaways

• FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao.
• Zhao’s tweet accelerated FTX’s collapse.
• The lawsuit is one of over 20 similar cases filed by FTX against former partners.

Beleaguered crypto exchange FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao, seeking $1.8 billion in damages over an allegedly fraudulent 2021 share repurchase deal.

This suit is one of many cases FTX has initiated against Zhao and Binance, accusing them of perpetuating a fraudulent scheme that ultimately contributed to the exchange’s downfall.

The 2021 Share Repurchase Deal

According to court filings , FTX’s estate alleges that the company and its sister hedge fund, Alameda Research, were insolvent by 2021.

Despite this, FTX sold 20% of its stakes in its global entity and 18.4% in its United States-based firm to Binance for $1.76 billion in FTX’s native token, FTT, and Binance-affiliated tokens, such as BNB and BUSD.

The lawsuit claims that this deal was fraudulent and that Zhao and Binance were aware of FTX’s financial troubles.

The Chain of Events Leading to FTX’s Collapse

The lawsuit also accuses Zhao of posting a series of false, misleading, and fraudulent tweets that further destabilized FTX.

According to the filing, Zhao’s Nov. 6 tweet was maliciously calculated to destroy its rival.

In November 2022, Zhao tweeted that Binance would sell  its massive holding of FTT tokens. This caused a rapid decline in the token’s value and a subsequent liquidity crisis at FTX.

FTX’s financial troubles were further exacerbated by Zhao’s tweet, which led to heavy withdrawals from the platform and ultimately forced the exchange to declare bankruptcy.

A Bid for Recovery

The lawsuit is just the latest in a string of legal actions taken by FTX’s estate to reclaim millions in assets from former partners.

Investigations have revealed that FTX, led by its former CEO Sam Bankman-Fried, was built on a foundation of fraud and mismanagement of customer funds.

While Zhao’s tweet may have accelerated FTX’s collapse, it was only one part of a larger scheme to defraud customers and prop up the exchange’s financial facade.

The full extent of the damage is still being uncovered, but one thing is clear: FTX’s downfall was a result of a complex web of deceit and mismanagement.

The lawsuit against Binance and Zhao could mark a significant step in FTX’s ongoing bankruptcy recovery efforts.

With over 20 lawsuits filed against former partners, FTX’s estate is seeking to reclaim millions in assets and hold accountable those responsible for the exchange’s collapse.