### FTX Bankruptcy Estate Takes Legal Action Against Binance for $1.76 Billion in Alleged Fraudulent Transfers
The bankruptcy estate of the defunct cryptocurrency platform FTX has initiated a legal action against its previous competitor Binance, aiming to reclaim a minimum of $1.76 billion that was reportedly transferred through fraudulent means. Filed in the U.S. Bankruptcy Court in Delaware, the lawsuit also includes Binance’s co-founder and former CEO, Changpeng Zhao (often referred to as “CZ”), as a defendant. The filing accuses both Binance and Zhao of participating in fraudulent transfers, unjust enrichment, and various forms of misconduct that purportedly impacted FTX’s creditors adversely.
#### Lawsuit Background
The legal action arises from a transaction in 2021 where FTX repurchased Binance’s 20% stake in the company. Binance had initially put money into FTX back in 2019; however, by 2021, Zhao chose to withdraw his investment due to personal issues with FTX’s founder, Sam Bankman-Fried (SBF). The buyback agreement, arranged in July 2021, saw FTX’s Alameda Research division financing the deal using a mix of cryptocurrency tokens, comprising FTX’s native token (FTT), Binance’s token (BNB), and Binance’s stablecoin (BUSD). The collective worth of these tokens was approximated to be at least $1.76 billion at that time.
Nevertheless, the lawsuit asserts that FTX and Alameda were already facing insolvency by early 2021. Consequently, the transfer of $1.76 billion is claimed to be a “constructive fraudulent transfer” according to bankruptcy law, meaning it was executed without adequate assets to satisfy liabilities. Additionally, the lawsuit contends that the transfer was an “intentional fraudulent transfer” aimed at furthering Bankman-Fried’s efforts to obscure FTX’s financial troubles.
#### Main Allegations
1. **Fraudulent Transfer**: The lawsuit claims that, given FTX and Alameda’s insolvency at the time of the deal, the $1.76 billion transfer to Binance was fraudulent. The complaint states that Alameda was unable to finance the buyback without borrowing from FTX, a decision that purportedly exacerbated FTX’s financial predicament.
2. **Misrepresentation by SBF**: The lawsuit references testimony from Caroline Ellison, former CEO of Alameda Research, who indicated she had cautioned Bankman-Fried regarding the insufficient funds for the buyback. Despite these warnings, Bankman-Fried purportedly insisted on moving forward with the transaction, allegedly utilizing customer deposits to facilitate the deal. The lawsuit also highlights a public claim made by Bankman-Fried in which he incorrectly asserted that Alameda fully funded the buyback with its own resources.
3. **Zhao’s Alleged Role in FTX’s Downfall**: The complaint further alleges that following his divestment from FTX, Zhao attempted to “destroy” the company, which had emerged as a rival to Binance. According to the lawsuit, Zhao’s actions—especially a series of tweets issued in November 2022—triggered a “run on the bank,” culminating in FTX’s collapse. The lawsuit claims that Zhao’s tweets were deceptive and intended to harm FTX, ultimately aiding in its demise.
4. **Binance’s Withdrawal from Acquisition Agreement**: As FTX encountered a liquidity crisis in November 2022, Binance initially consented to acquire FTX to aid in stabilizing the situation. However, Binance withdrew from the agreement within 24 hours, citing concerns unearthed during due diligence. The lawsuit declares that Zhao was already cognizant of FTX’s financial difficulties prior to consenting to the acquisition and that his choice to withdraw was part of a broader strategy to dismantle FTX.
#### Larger Legal Struggle
This lawsuit forms part of a more extensive initiative by FTX’s bankruptcy estate to recoup assets for its creditors. Concurrently with the filing of the Binance lawsuit, FTX launched 23 additional legal actions against various entities and individuals, including Anthony Scaramucci’s hedge fund SkyBridge Capital, Crypto.com, and FWD.US, a political advocacy organization founded by Mark Zuckerberg. These legal actions are part of an assertive legal strategy targeting the recovery of funds that FTX alleges were improperly transferred or misappropriated.
#### Testimonies and Sentences
Caroline Ellison, a crucial figure in Alameda Research, has already received a two-year prison sentence for her involvement in concealing FTX’s fraudulent activities. During her testimony, Ellison acknowledged that Alameda had utilized around $1 billion of FTX customer deposits to facilitate the buyback of Binance’s stake. Her testimony serves as a significant piece of evidence in the ongoing legal proceedings against Bankman-Fried and other executives at FTX.
Bankman-Fried himself is currently serving a 25-year prison sentence for his role in orchestrating the fraud that resulted in FTX’s downfall. His activities, including the misuse of customer funds and the spread of falsehoods, have been integral to the various lawsuits and
