The estate of bankrupt cryptocurrency exchange FTX has filed a lawsuit against Binance, the world’s largest crypto exchange, and its former CEO Changpeng Zhao, a report has said. FTX is seeking to recover at least $1.76 billion in the lawsuit that centres on a 2021 share repurchase deal that FTX alleges was fraudulent.
According to a report by CNBC, the lawsuit has been filed in a Delaware court, claiming that Binance, Zhao, and other parties involved in the transaction fraudulently exited their investment in FTX. In 2021, Binance sold its 20% stake in FTX and its 18.4% stake in FTX’s U.S. entity, West Realm Shires, back to FTX.
FTX alleges that the repurchase was funded by Alameda Research, FTX’s affiliated trading firm, using a combination of FTX’s and Binance’s exchange tokens, as well as Binance’s stablecoin.
“Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction,” the suit claims,” the lawsuit claims. The FTX estate also argues that the deal, agreed upon with FTX co-founder Sam Bankman-Fried, constitutes a “constructive fraudulent transfer.”
Bankman-Fried is currently serving a 25-year prison sentence for fraud charges related to the collapse of FTX.
Why this lawsuit matters
This lawsuit was a part of the ongoing bankruptcy proceedings of FTX with the FTX estate filing a lawsuit against SkyBridge Capital, the hedge fund founded by Anthony Scaramucci, former White House communications director.
The lawsuit against SkyBridge Capital is just one of many legal actions initiated by the FTX estate. Last month, a U.S. bankruptcy judge approved FTX’s plan to repay creditors up to $16.5 billion. Under this plan, 98% of creditors are expected to receive full repayment plus compensation.
