FTX Files $1.8B Lawsuit Against Binance and CZ
FTX entered a $1.8 billion legal battle with Binance and its former CEO over fraudulent transactions.
The FTX bankruptcy estate has taken legal action against Binance, the world’s largest crypto exchange, and its founder, Changpeng Zhao (CZ). According to the court document, firms involved in the FTX bankruptcy proceedings initiated the lawsuit against Binance to recover $1.8 billion from the leading crypto platform.
The plaintiffs claimed that CZ and other executives received $1.76 worth of crypto assets through fraudulent transactions from the now-collapsed crypto platform.
Fraudulent Transactions in Binance’s deal with FTX
The FTX estate alleged that a July 2021 stock repurchase agreement between Bankman-Fried and Zhao is the source of this legal dispute. Bankman-Fried repurchased about 20% of FTX International and nearly 18.4% of FTX US shares from Binance as part of this transaction.
According to the complaint, Bankman-Fried used a combination of FTX’s native token (FTT), Binance’s BNB, and Binance USD (BUSD), which at the time had a combined worth of $1.76 billion, to finance this acquisition. However, the FTX estate added that the deal should be fraudulent because FTX and its sister firm, Alameda Research, were insolvent as early as 2021.
Zhao is also charged in the lawsuit with planning a targeted campaign to damage its rival’s reputation and market dominance. They claimed that Binance’s FTT liquidation was a deliberate attempt to destabilize its rival and Zhao’s actions were part of a larger plan to force FTX out of the market.
The complaint noted that Zhao intended to decrease the price of FTT and weaken FTX’s financial position.
Binance, FTT Liquidation and Market Manipulation
A central issue in the FTX estate’s case is Binance’s liquidation of FTT prior to the exchange’s shutdown in November 2022. The lawsuit also claimed that prior to Zhao’s tweet thread on November 6, 2022, which signaled the sell-off, Binance had already liquidated a significant quantity of FTT.
Additionally, the estate alleged that Zhao deceived the defunct crypto firm and its creditors with his letter of intent to purchase FTX and public declarations of due diligence. Such actions were intended to stop the firm from looking for other sources of funding, putting it in a financially precarious situation.
FTX Sister Firm Initiates Lawsuit Against Waves Founder
Similarly, the defunct crypto firm’s sister firm, Alameda Research, has filed a lawsuit against Waves founder Aleksandr Ivanov to recoup almost $90 million in digital assets. In the court filings, Alameda alleged that Ivanov falsified Waves token values on Vires Finance, a Waves-based decentralized liquidity platform.
Hence, he diverted money from Vires customers through a number of covert transactions that falsely increased Waves’ value. The filing also alleged that Ivanov’s fund redirection and the inflation of WAVES tokens caused WAVES to lose more than 95% of its market capitalization.
Vires users suffered losses totaling $530 million due to the token’s price slump. Alameda’s legal action against Ivanov is part of the defunct crypto firm’s larger legal plan to recover losses sustained after the company’s collapse.
Reports indicate that the estate has initiated more than 20 similar cases this year.
Implications for the Crypto Market
This litigation highlights the persistent problems with accountability, transparency, and market manipulation in the cryptocurrency sector. The demand for legislative changes and more regulatory control has accelerated since the FTX collapse, which cost investors and consumers more than $8.9 billion.
If confirmed, observers believe that the proceedings against Zhao and Ivanov will highlight the necessity for more transparent regulations to improve and boost investor confidence in the cryptocurrency market. They also believe that the proceedings will highlight the significant upheaval that is influencing the cryptocurrency market.
The need for regulatory control will continue to grow as claims of market manipulation, fraudulent transactions, and disinformation emerge. In addition to recovering lost money, the sister firms hope that these legal actions will provide authorities and industry participants with the impetus they need to push for long-overdue changes in oversight functions over the cryptocurrency sector.
