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FTX, the bankrupt cryptocurrency exchange, has launched a legal battle against its former rival Binance and its ex-CEO Changpeng “CZ” Zhao.?
As reported by Bloomberg, the lawsuit was filed on Sunday in the Delaware bankruptcy court and seeks to reclaim approximately $1.8 billion allegedly transferred fraudulently by FTX’s founder, Sam Bankman-Fried.
The legal action comes from a July 2021 share repurchase agreement between FTX and Binance where Bankman-Fried sold stakes of about 20% in FTX’s international unit and 18.4% in its US-based entity to Binance, Zhao, and other Binance executives.
The payment for this transaction, valued at $1.76 billion at the time, was made using a mix of cryptocurrencies, including FTX’s native token FTT, Binance’s BNB, and the stablecoin BUSD.
FTX alleges that both FTX and its sister company Alameda Research may have been insolvent by early 2021 and as such, makes the stock repurchase a fraudulent transaction.
Other names mentioned as defendants in the lawsuit include former White House communications director Anthony Scaramucci and his hedge fund SkyBridge Capital, Mark Zuckerberg’s FWD.US, and crypto exchange Crypto.com.
FTX Blames Zhao’s Action for its Collapse
The lawsuit also accuses Zhao of engaging in actions that were intended to harm FTX’s market position, which partly affected its efforts to secure emergency funding, ultimately resulting in a liquidity crisis and the exchange’s collapse in 2022.
This legal action is part of FTX’s ongoing efforts to recover assets for its creditors amid bankruptcy proceedings and marks fresh troubles for Zhao who stepped down as Binance chief last year after he pleaded guilty to breaking U.S. anti-money laundering laws.
The unfolding legal proceedings are likely to shed further light on the complex network of relationships and transactions that precipitated one of the most dramatic collapses in the history of cryptocurrency.
