FTX sues Binance, former CEO CZ for alleged fraudulent $1.76b switch

• In 2019, Binance acquired a 20% stake in collapsed FTX in a take care of Sam Bankman-Fried
• In 2021, Binance and FTX agreed to a deal that noticed FTX shopping for again the stake, amounting to $1.76bn in FTT, BNB, and BUSD
• The switch was completed by Alameda Analysis, which was bancrupt on the time and couldn’t afford the transaction

FTX has filed a lawsuit towards Binance and its co-founder and former CEO Changpeng “CZ” Zhao to reclaim $1.76 billion over an alleged fraudulent switch.

A submitting from November 10 acknowledged that Sam Bankman-Fried, FTX’s co-founder, fraudulently transferred “not less than $1.76 billion” to Binance and Binance executives in July 2021.

In March, Bankman-Fried was sentenced to 25 years in jail for defrauding clients.

In accordance with the submitting, the switch was a part of a repurchase deal between Binance and FTX and shouldn’t have occurred. The submitting claims that in November 2019, Binance acquired a 20% fairness stake in FTX with over a million in Binance’s BNB token in a take care of Bankman-Fried.

Round February 2020, Binance acquired an extra 18.4% in WRS, an umbrella firm of Bankman-Fried primarily based within the US. Nevertheless, in July 2021, the 2 events agreed on a deal that noticed FTX purchase again Binance and its executives’ whole stakes in FTX and WRS.

This amounted to round $1.76 billion in FTX’s FTT token, BNB, and BUSD (Binance’s stablecoin), which was funded by FTX’s sister firm Alameda Analysis.

Couldn’t afford the transaction

Per the submitting, the switch was fraudulent as a result of Alameda was bancrupt on the time and couldn’t afford the transaction. In accordance with testimony from Caroline Ellison, former CEO of Alameda Analysis, Alameda spent round “$1 billion of FTX Buying and selling’s capital acquired from depositors to fund the repurchase.”

In September, Ellison was sentenced to 24 months in jail for her position within the collapse of FTX.

Following the repurchase, on November 6, 2022, Zhao is alleged to have “despatched a sequence of false, deceptive, and fraudulent tweets that have been maliciously calculated to destroy his rival FTX, with reckless disregard to the hurt that FTX’s clients and collectors would endure.”

Consequently, “Zhao’s false tweets triggered a predictable avalanche of withdrawals at FTX – the proverbial run on the financial institution that Zhao knew would trigger FTX to break down,” in accordance with the submitting.