Imprisoned crypto king Sam Bankman-Fried is now accused of yet even more wrongdoing, this time by the defunct exchange he founded.
FTX, which was at one time the darling of the digital currency world, is suing fellow crypto exchange boss Changpeng “CZ” Zhao, the Binance founder who acquired an equity stake in FTX in 2019, claiming Bankman-Fried, known colloquially as “SBF,” committed fraud in making a later, related, deal with Zhao and wants its $1.76 billion back.
The suit was filed in Delaware bankruptcy court by those winding down the now-shuttered FTX. The formerly high-flying startup filed for Chapter 11 in 2022.
Bankman-Fried’s “pervasive malfeasance began long before it was discovered” that same year, the lawsuit states. It says he knew, secretly, that FTX was effectively insolvent when he agreed in July 2021 to buy back Zhao’s shares in the company, thus making the transfer a fraudulent one. The money Bankman-Fried used to pay Zhao had been illegally funded by raiding customer accounts, according to the suit. Bankman-Fried is roughly eight months into a 25-year sentence on seven federal fraud and conspiracy charges.
Binance is today the largest cryptocurrency exchange in the world by trading volume, the lawsuit explains, pointing to its more than $100 trillion in all-time trade value. But, it contends, “Binance and Zhao achieved their success in large part due to their patent disregard for, and affirmative violations of, the laws of the United States.” The suit makes note of Zhao’s four-month prison sentence in 2024 for ignoring anti-money laundering policies and having “allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
Following Zhao’s divestiture of his FTX investment, he immediately began trying to ruin the company, now a competitor, according to the suit.
“As FTX grew, it became a clear threat to Binance’s market dominance,” it says. “… Beginning on November 6, 2022, Zhao sent a series of false, misleading, and fraudulent tweets that were maliciously calculated to destroy his rival FTX, with reckless disregard to the harm that FTX’s customers and creditors would suffer… Zhao’s false tweets triggered a predictable avalanche of withdrawals at FTX – the proverbial run on the bank that Zhao knew would cause FTX to collapse.”
Adding to FTX’s already deepening troubles, Zhao posted “additional false tweets calculated, in part, to prevent FTX from seeking and obtaining alternative financing to cauterize the run on the institution by customers deceived by the tweets.”
