FTX sues former Binance CEO CZ for allegedly fraudulently transferring $1.76 billion

In 2019, Binance acquired a 20% stake in failed FTX in a deal with Sam Bankman Fried. In 2021, Binance and FTX agreed to a deal in which FTX repurchased its shares, bringing the total value of FTT, BNB, and BUSD to $1.76 billion. The transfer was made by Alameda Research, which was bankrupt at the time and could not afford the deal.

FTX has filed a lawsuit against Binance and its co-founder and former CEO Changpeng “CZ” Chao, seeking restitution of $1.76 billion for alleged fraudulent transfers.

A Nov. 10 filing states that FTX co-founder Sam Bankman Fried fraudulently transferred “at least $1.76 billion” to Binance and Binance executives in July 2021. are.

In March, Bankman Freed was sentenced to 25 years in prison for defrauding customers.

According to the filing, this transfer was part of a buyback agreement between Binance and FTX and should not have happened. According to the filing, Binance held more than 1 million Binance BNB tokens and acquired a 20% stake in FTX in November 2019 through a deal with Bankman Freed.

Around February 2020, Binance acquired an additional 18.4% stake in WRS, a subsidiary of US-based Bankman Freed. However, in July 2021, the parties reached an agreement under which FTX would buy back Binance and its executives' entire shares in FTX and WRS.

This represents approximately $1.76 billion in FTX's FTT token, BNB, and BUSD (Binance stablecoin), and was funded by FTX's sister company Alameda Research.

I couldn't afford to trade

The transfer was fraudulent because Alameda was in bankruptcy at the time and could not afford the transaction, according to the filing. Alameda “used approximately $1 billion of the FTX Trading capital received from depositors to fund share buybacks,” according to testimony from former Alameda Research CEO Caroline Ellison.

In September, Ellison was sentenced to 24 months in prison for his role in the FTX collapse.

On November 6, 2022, after the share buyback, Mr. Zhao said, “With reckless disregard for the harm suffered by FTX's customers and creditors, we have made a series of lies and misinformation maliciously calculated to destroy our rival FTX.'' He is said to have sent fraudulent tweets inviting theft. ”

As a result, “Mr. Zhao's false tweet triggered a predictable avalanche of withdrawals into FTX, a proverbial bank run that Mr. Zhao knew would cause FTX to collapse,” the filing said. It is stated in.