The estate of the now-defunct cryptocurrency exchange FTX has filed a lawsuit against Binance and its former CEO Changpeng Chao, seeking to recover $1.76 billion. FTX alleges that these funds were fraudulently transferred to Binance, Zhao, and other Binance executives in July 2021 as part of a stock repurchase agreement with FTX co-founder Sam Bankman Fried. .
According to the filing, the deal will see Binance sell its 20% stake in FTX’s international arm and its 18.4% stake in the U.S.-based entity, and Bankman Freed will sell FTX and Binance-branded cryptocurrencies. It is said that he paid the price by combining the following. The FTX Foundation said the stock buyback transaction was illegal because FTX and its sister company Alameda were already insolvent at the time and unable to fund the transaction after a massive fraud by Bankman Fried and other executives. It is claimed that this was done.
Bankman Freed, who is serving a 25-year prison sentence, was convicted last year of fraud for using clients’ funds to make investments, political contributions and real estate purchases.
Separately, the complaint says Zhao sent “a series of false, misleading and fraudulent tweets maliciously calculated to destroy rival FTX.” Mr. Zhao tweeted on November 6, 2022 that Binance plans to liquidate $529 million worth of FTX tokens. According to the FTX Foundation, this “triggered a predictable avalanche of withdrawals” and contributed to the collapse of crypto exchanges.
The flight to FTX ultimately exposed the company’s financial tower and led to criminal charges against Bankman Fried and others. The Securities and Exchange Commission said FTX’s collapse was caused by Bankman Freed’s “misappropriation of customer funds” and that the operation was fraudulent “from the beginning.”
An anonymous Binance spokesperson told Bloomberg that the allegations against the company are “baseless” and that the company will “vehemently defend itself.”
