FTX Sues Binance and Former CEO Changpeng Zhao in $1.8B Recovery Push

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• FTX has filed a $1.8 billion lawsuit against Binance and its former CEO, Changpeng Zhao, over an allegedly fraudulent buyback of Binance’s stake in FTX.
• The lawsuit is part of a series of legal actions by FTX, seeking to recover funds lost in its 2022 collapse, targeting Binance, Anthony Scaramucci, and other entities.

Bankrupt cryptocurrency exchange FTX has filed a major lawsuit against rival Binance and its former CEO, Changpeng “CZ” Zhao. The lawsuit seeks to recover $1.8 billion from a 2021 deal in which Binance sold its 20% stake in FTX.

According to FTX, this buyback, initiated by FTX’s then-CEO Sam Bankman-Fried (SBF), was financed with FTX’s native token, FTT, along with Binance’s tokens BNB and BUSD, despite FTX allegedly being insolvent at the time.

The suit claims the transaction was fraudulent, as it involved Alameda Research, SBF’s trading firm, using borrowed FTX funds to pay for the buyout. This lawsuit is part of FTX’s broader effort to retrieve funds lost in its collapse and compensate creditors.

The case against Binance and CZ is one of 28 clawback lawsuits that FTX has filed recently. These legal actions come as FTX attempts to recover funds from various individuals and entities who allegedly benefited from the company’s funds before its bankruptcy. Other high-profile defendants in these lawsuits include Skybridge Capital’s Anthony Scaramucci and Waves blockchain founder Aleksandr “Sasha” Ivanov.

FTX is also seeking approximately $284 million from other parties, although the exact sum it may ultimately reclaim depends on court rulings regarding damages.

Allegations in the lawsuit suggest that FTX’s finances were precarious from the outset, with Bankman-Fried allegedly aware of the company’s insolvency even as he negotiated the deal with Binance. According to the filing, FTX’s FTT tokens were effectively worthless at the time of the buyback, rendering the transfer fraudulent. FTX claims Binance’s Zhao contributed to its financial troubles by publicly questioning the company’s stability, which may have further damaged its standing in the industry.

Commenting on the lawsuit, a Binance spokesperson dismissed the claims as “meritless,” vowing to “vigorously defend” the company’s position.

In addition to its lawsuit against Binance, FTX is pursuing funds from other exchanges like Huobi and Crypto.com’s owner Foris Dax, alleging that Alameda assets are being withheld.