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Future Exchange (FTX), the bankrupt cryptocurrency exchange, has filed a lawsuit against Binance Holdings Ltd. and its former CEO, Changpeng Zhao, seeking nearly $1.8 billion in damages. The lawsuit alleges that a fraudulent transaction, orchestrated by FTX co-founder Sam Bankman-Fried, occurred in a share repurchase deal in July 2021.
The FTX estate’s filing contains a claim that FTX repurchased Binance’s 20% stake in its international operations and 18.4% stake in its U.S.-based affiliate, West Realm Shires (WRS), through Alameda Research.
In November 2019, Binance acquired a stake in FTX using 1,002,739 BNB tokens. Subsequently, in 2020, the investment was expanded to include WRS for $2. Nevertheless, Binance withdrew from the investment in 2021 due to the increasing tensions between Zhao and Bankman-Fried.
Binance’s stablecoin, BUSD, and FTX’s native FTT token, BNB, were the sources of funding for the $1.76 billion repurchase transaction. The legitimacy of the transaction is now being called into doubt by FTX, which asserts that Alameda was insolvent at the time of the deal.
Caroline Ellison, the former CEO of Alameda Research, testified that she had advised Bankman-Fried of the inadequacy of the funds. She further stated that the buyback was ultimately financed by approximately $1 billion in depositor funds from FTX.
Binance has denied the allegations, describing them as “meritless” and committing to defending itself against them. This lawsuit is a further development in FTX’s ongoing endeavours to reclaim assets that were lost in the aftermath of its collapse. The exchange is seeking culpability for what it deems to be mismanagement and questionable interactions with major industry actors.
