FTX Sues Binance and CZ Over Alleged Fraudulent Fund Transfer
Bankrupt cryptocurrency exchange FTX previously filed a lawsuit against Binance and its founder Changpeng Zhao, alleging that a sum of $1.76 billion was fraudulently transferred by Binance. However, Binance has recently submitted a motion to the court seeking dismissal of these allegations, claiming they are “legally untenable.”
(Background: FTX Sues Binance and CZ! Demanding “Return of $1.8 Billion” for Stock Buyback, What Happened?)
(Context: Binance and CZ Face Class Action Lawsuit from California Investors! Accused of Being “The Culprit Behind FTX’s Collapse”)
FTX’s Lawsuit Details
The bankrupt cryptocurrency exchange FTX filed a lawsuit on November 10, 2024, in the U.S. Bankruptcy Court in Delaware against the cryptocurrency exchange Binance and its founder Changpeng Zhao, seeking to recover approximately $1.76 billion in funds. The FTX bankruptcy management team accused Binance of fraudulently transferring these funds during a stock buyback transaction in July 2021, asserting that Zhao’s actions further accelerated FTX’s collapse.
Allegations Against Binance and CZ
FTX has made several allegations against Binance and Zhao, specifically including:
- Fraudulent Stock Buyback: FTX claims that in July 2021, Binance sold its holdings of 20% equity in FTX’s international division and 18.4% in its U.S. division, funded by FTX’s sister company Alameda Research, for a total value of approximately $1.76 billion. This included FTX’s FTT tokens, Binance’s BNB tokens, and BUSD stablecoins. FTX alleges that at that time, Alameda and FTX were already insolvent, and the funds came from customer deposits, constituting a “willful fraudulent transfer.”
- Zhao’s Tweet Triggering a Bank Run: FTX further alleges that a tweet from Zhao on November 6, 2022, announcing the liquidation of approximately $529 million worth of FTT tokens sparked market panic, leading FTX customers to withdraw around $6 billion within 48 hours, triggering a liquidity crisis and accelerating its collapse.
- Market Manipulation and Unfair Competition: FTX accuses Binance of conducting a months-long “FUD” campaign, including leaking Alameda’s balance sheet to CoinDesk, which raised doubts about FTX’s financial situation.
- Misleading Acquisition Intent: FTX alleges that on November 8, 2022, Binance signed a non-binding letter of intent to acquire FTX but withdrew the next day citing “due diligence,” misleading the market and hindering FTX’s search for alternative financing, further exacerbating its crisis.
Binance’s Rebuttal to FTX’s Allegations
In response to FTX’s allegations, Binance’s legal team recently filed a motion in the Delaware Bankruptcy Court seeking to dismiss FTX’s $1.76 billion lawsuit, asserting that it is “legally untenable” and accusing FTX of attempting to shift the blame for its own failure onto its competitors. Binance’s detailed rebuttal in the motion includes:
- Denial of Fraudulent Transfer: Binance refuted FTX’s claims of fraudulent transfer, emphasizing that FTX operated normally for 16 months after the stock buyback, with no evidence indicating insolvency at the time. Binance stated that the transaction was conducted using tokens at market value, consistent with business practices and not an unjust enrichment.
- Zhao’s Tweet Based on Public Information: Binance argued that Zhao’s tweet was a reasonable response to the issues revealed in Alameda’s balance sheet by CoinDesk on November 2, 2022, and not market manipulation. Binance highlighted that Zhao stated he would “try to minimize market impact.”
- Questioning Court Jurisdiction: Binance pointed out that the foreign entities named are not registered or have principal places of business in the U.S., thus falling outside the jurisdiction of the Delaware Bankruptcy Court.
- Blaming Internal Fraud at FTX: Binance contended that FTX’s collapse stemmed from “one of the largest corporate frauds in history” led by SBF, including the misappropriation of approximately $8 billion in customer funds, rather than any external actions by Binance. Binance asserted that FTX’s allegations are “based on the speculation of a convicted fraudster” and lack substantial evidence.
Overall, the core of FTX’s lawsuit alleges that Binance obtained improper funds during the 2021 stock buyback and accuses Zhao’s tweets and market actions of accelerating FTX’s collapse. Binance, however, maintains that its actions were legal, and FTX’s failure was due to internal fraud rather than external factors. Currently, FTX has not responded to Binance’s motion to dismiss, and the case’s progress remains subject to court proceedings.
Related Reports
- Binance Independent Monitor Revealed, Bloomberg: FTX Bankruptcy Law Firm S&C to Serve, Regularly Sending Anti-Money Laundering Reports
- SBF’s Biography Exposes: The Collaboration with Binance Fell Through, Leading to the Birth of FTX, and the Heavy Cuts in the Buyback of FTT from CZ
- SBF’s Sudden Post: Did Not Steal or Hide Billions; Alameda’s Leverage Loss Resulted in FTX’s Bankruptcy; Binance’s CZ…