FTX Wealth has filed a lawsuit against rival firm Binance and its former CEO Changpeng Zhao in a bid to recover around $1.8 billion tied to an alleged “fraudulent” deal orchestrated by Sam Bankman-Fried.
Filed in Delaware bankruptcy court on Sunday, the lawsuit centers on a 2021 share buyback agreement between Bankman-Fried — who is currently in prison for fraud — and top Binance executives.
Zhao and his allies sold shares amounting to roughly 20% of FTX’s international business and an 18.4% stake in a US-based subsidiary in exchange for a massive sum of cryptocurrency worth $1.76 billion at the time.
Guardians of the now-defunct FTX claim that the firm and its sister cryptocurrency firm Alameda Research “may have been insolvent from the start and were certainly insolvent by early 2021” – meaning that the stock repurchase agreement was inherently fraudulent.
The lawsuit further alleges that Zhao “set out to destroy” FTX after he sold his equity shares — in part by posting “a series of false, misleading and deceptive tweets that were maliciously calculated” to result in the firm’s collapse .
“Zhao’s false tweets caused a predictable avalanche of withdrawals on FTX — the proverbial bankroll that Zhao knew would cause FTX to collapse,” the lawsuit states.
Binance disputed the lawsuit’s claims.
“The claims are baseless and we will defend ourselves vigorously,” a Binance spokesperson said in a statement.
Once a top cryptocurrency firm valued at $32 billion, FTX filed for bankruptcy in November 2022. It was later revealed that Bankman-Fried stole billions of dollars in client funds to support risky bets made by Alameda.
As the lawsuit notes, the FTX meltdown began after CoinDesk published an article revealing that Alameda Research was heavily invested in FTT — a cryptocurrency token that issued FTX itself.
The lawsuit cited multiple posts by Zhao that were allegedly intended to incite panic about the revelation, including a Nov. 6, 2022 post in which he described Binance’s decision to divest its holdings in FTT tokens as “just post-exit risk management.”
“Zhao’s intent was to maximize market influence and cause the price of FTT to fall, thereby harming FTX and increasing Binance’s market share,” the lawsuit states.
Bankman-Fried was sentenced to 25 years in prison last March for his role in the collapse of FTX.
Separately, Zhao was released from prison in September after serving a four-month sentence for violating US anti-money laundering laws.
Prosecutors had said that Binance, under Zhao’s leadership, had failed to report suspicious crypto transactions from terrorist groups such as Hamas and al-Qaeda. Binance agreed to pay a $4.32 billion penalty as part of the case.
Zhao has since stepped down as CEO of Binance, but remains its major shareholder.
By postal wire
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