FTX Takes Legal Action Against Binance and CEO CZ for $1.8 Billion

FTX has initiated legal proceedings against Binance and its former CEO, Changpeng "CZ" Zhao, over an alleged fraudulent share repurchase linked to the company’s insolvency. This lawsuit comes on the heels of claims that the repurchase, funded by Zhao's trading firm, was executed when FTX was already facing severe financial difficulties.

The repurchase was reportedly financed through FTX's trading partner, Alameda Research. However, Caroline Ellison, Alameda’s second-in-command, cautioned that "we don’t really have the money for this," as outlined in the court documents submitted.

Bankman-Fried negotiated the purchase of Binance's stake in FTX using FTT, Binanace-issued BNB, and BUSD tokens, collectively valued at around $1.76 billion. Despite this, allegations emerged asserting that FTX was insolvent during the transaction and that the FTT tokens were effectively worthless, deeming the transfer fraudulent.

FTX's bankruptcy proceedings began in November 2022 following revelations of balance sheet irregularities. Bankman-Fried was subsequently sentenced to 25 years for multiple counts of fraud earlier this year.

In addition, FTX claims that Zhao’s actions, including a series of public statements about the company, caused significant damage and loss of value to FTX stakeholders. A Binance representative responded by stating, "The claims are meritless, and we will vigorously defend ourselves".

Read More: Humpy the Whale Cost FTX, Alameda $1 Billion in Losses, Lawsuit Alleges

UPDATE (Nov. 11, 13:10 UTC): Adds Binance's response.