FTX Estate Launches $1.8B Lawsuit Against Binance Over Alleged Fraudulent Share Buyback

The FTX bankruptcy estate has filed a $1.8 billion lawsuit against Binance and its former CEO Changpeng “CZ” Zhao, targeting a controversial 2021 share repurchase agreement.

The lawsuit, filed in Delaware bankruptcy court on November 10, centers on a deal where FTX bought back approximately 20% of its international business and 18.4% of its U.S. affiliate from Binance. According to court documents, the transaction was valued at $1.76 billion and was paid using a combination of FTX Token (FTT), BNB, and BUSD.

The estate’s legal team argues that both FTX and its trading arm, Alameda Research, were insolvent when the deal was executed. Former Alameda CEO Caroline Ellison’s testimony reveals that the firm had to borrow approximately $1 billion from FTX customer deposits to complete the transaction, with Ellison reportedly warning at the time, “we don’t really have the money for this.”

The complaint also accuses Zhao of orchestrating FTX’s downfall through a “calculated campaign” of destructive actions. The estate points to Zhao’s November 2022 tweets about liquidating Binance’s FTT holdings as deliberately triggering a “predictable avalanche of withdrawals” that ultimately led to FTX’s collapse.

In response to the allegations, a Binance spokesperson stated, “The claims are meritless, and we will vigorously defend ourselves.”

This legal action follows a series of lawsuits filed by the FTX estate against various entities and former executives as it seeks to recover funds for creditors. The case adds another chapter to the ongoing saga of FTX’s collapse, which resulted in a 25-year prison sentence for founder Sam Bankman-Fried earlier this year.

The lawsuit emerges amid broader turmoil in the cryptocurrency industry, with both former CEOs facing legal consequences – Bankman-Fried serving his prison term for fraud, while Zhao recently stepped down as Binance’s CEO following a guilty plea to anti-money laundering violations.