Athira Sethu
Kochi, 12 November 2024
The collapsed cryptocurrency company FTX is now suing the world’s largest cryptocurrency exchange, Binance, and its former CEO, Changpeng Zhao. The lawsuit states that FTX’s management fraudulently transferred $1.8 billion to Binance and its leaders.
The dispute concerns the sale of Binance’s interest in FTX, which the company had bought back in 2019. Binance agreed to a buyback of those shares back from FTX in July 2021 for the price they paid for it. The Alameda Research wing of FTX had funded the buyback using cryptocurrency tokens issued by FTX, whose values were $1.76 billion at then. However, according to the lawsuit, Alameda was insolvent and had no means of financing the purchase of those shares. FTX should not have been allowed to close the deal under such circumstances.
FTX’s attorneys are now trying to get back at least $1.76 billion from FTX’s creditors and are also attempting to recover extra damages including punitive damages that will be determined by the court. A Binance representative has outrightly denied the claims saying they have no merit as the company will defend itself vigorously.
This is one of the recent rows between FTX and Binance. FTX, one of the world’s largest cryptocurrency companies, also collapsed in late 2022. In a financial crisis that led to the collapse of FTX, its chief executive, Zhao who was also the founder of Binance initially offered to bail FTX and even bid for FTX’s international business. Binance backed out of the deal and made FTX declare bankruptcy.
In March 2024, Sam Bankman-Fried- Founder of FTX was convicted for stealing $8 billion from customers and sentenced to 25 years in prison; he has appealed his conviction. Changpeng Zhao, the chief executive of Binance, had also run-ins with the law. He pleaded guilty early this year to violating U.S. anti-money laundering laws and got four months in prison.
