"FTX" has filed a lawsuit against "Binance", accusing the exchange of a $1.76 billion fraudulent transfer, and claiming that Binance’s CEO, Changpeng Zhao, worsened FTX’s financial situation.

Filed in the U.S. Bankruptcy Court, the lawsuit seeks to recover funds for FTX creditors, asserting that Binance’s actions undermined FTX stakeholders and destabilized the company.

Background

FTX, once a prominent crypto exchange, filed for bankruptcy in November 2022, following alleged financial missteps by founder Sam Bankman-Fried.

The lawsuit claims that “Bankman-Fried’s wrongdoings began long before it was discovered,” alleging that FTX may have been insolvent from inception and certainly... by early 2021.”

In the lawsuit, FTX argues that Binance’s actions in 2021, which allegedly included misleading actions and the removal of critical funds, accelerated FTX’s financial instability.

The Alleged Fraudulent Transfer

The lawsuit highlights a July 2021 share repurchase, in which FTX bought Binance’s equity stake for at least $1.76 billion. According to the complaint, this transfer involved a mix of "FTX" and "Binance" tokens, including (FTT), (BNB), and (BUSD).

FTX claims that its affiliate, Alameda Research, funded the transaction, despite concerns of insolvency. In her testimony, former Alameda executive, Caroline Ellison, stated she warned Bankman-Fried that “we don’treally have the money for this,” a concern Bankman-Fried allegedly dismissed, asserting the repurchase was “really important, we have to get it done.”

FTX argues this was intended to “conceal his companies’ insolvency and send a false signal of strength to the market.”

FTX further alleges that Bankman-Fried’s public response to questions around the transaction was misleading, with him stating, “The purchase was entirely from Alameda. Yeah, it had a good last year."

Zhao’s Alleged Actions and Consequences

"FTX" accuses "Zhao" of destabilizing its operations through “false, misleading, and fraudulent” tweets in November 2022. These tweets, FTX claims, triggered “a predictable avalanche of withdrawals at FTX,” resulting in a “run on the bank” that forced FTX into collapse.

According to the lawsuit, Zhao’s actions were “maliciously calculated to destroy his rival FTX,” aggravating FTX’s financial troubles and leaving customers and creditors at a disadvantage.

Moreover, FTX asserts that Zhao’s actions prevented the company from securing alternative financing, ultimately accelerating its financial decline.

FTX’s Legal Pursuit

The lawsuit also argues that Zhao’s actions were part of “a calculated attempt to eliminate FTX as a competitor,” using public statements to cause irreparable harm to FTX’s standing.

Through this lawsuit, FTX seeks to recover the $1.76 billion allegedly transferred to Binance and secure compensatory and punitive damages.