Bankrupt Crypto Platform FTX Sues Competitor Binance for $1.8 Billion

The collapsed digital currency platform FTX has initiated a legal battle against Binance and the latter’s erstwhile Chief Executive Officer, Changpeng Zhao, demanding compensatory damages amounting to $1.76 billion. The legal claim alleges that Binance, Zhao, along with other key figures, participated in what is described as a “deceptive” equity transaction that aimed to “annihilate” FTX.

It has been reported that in July 2021, Binance divested its holding in FTX worth $1.76 billion. Binance is said to have returned its 18.4% interest in FTX’s American segment, West Realm Shires, as well as a 20% equity in the global division of FTX, to the initial company.

It is alleged that Sam Bankman-Fried, the co-founder of FTX, gave his consent to the transaction. The deal was reportedly financed through Alameda Research, employing a combination of FTX and Binance cryptocurrencies. At the time when FTX and Alameda were experiencing considerable financial difficulties, the legal claim submitted by FTX’s estate contends that this sale was inappropriate.

The lawsuit avers, “Alameda was bankrupt at the time the equity repurchase took place and lacked the financial means to complete the transaction,” according to CNBC.

FTX’s Collapse

Additionally, the lawsuit accuses Zhao of utilizing social media to disseminate a sequence of defamatory communications aimed at undermining FTX. Via a social platform X, Zhao purportedly announced that Binance intended to offload $529 million in FTX-owned cryptocurrency (FTT tokens), and later indicated that Binance was disposing of its remaining FTT holdings.

The claim is that these tweets precipitated a massive wave of withdrawals, which were a significant factor in the downfall of FTX. Subsequently, the cryptocurrency exchange declared bankruptcy, and Bankman-Fried was incarcerated on seven fraud-related charges.

Following Bankman-Fried’s legal proceedings, Zhao was implicated in accusations of breaching the Bank Secrecy Act. It is alleged he failed to comply with U.S. economic sanctions and lacked a robust anti-money-laundering strategy.

Binance has responded to the lawsuit brought forward by FTX’s estate by denouncing it as “baseless” and has signaled its intention to robustly contest the claim. This ongoing case is one amongst 20 such lawsuits filed by FTX, as part of its efforts to reclaim billions from multiple parties.

This lawsuit emerges amidst an environment where cryptocurrencies like Bitcoin are reaching unprecedented valuations. With the recent election victory of Donald Trump, who has expressed support for the crypto market, investors are foreseeing an optimistic trend in the market and anticipating a potentially more relaxed regulatory framework under the new government.