In a recent court filing, the now-bankrupt cryptocurrency exchange FTX has initiated a lawsuit against its rival, Binance, and Binance's former CEO, Changpeng "CZ" Zhao, alleging a fraudulent share repurchase deal orchestrated by FTX's former CEO, Sam Bankman-Fried. The deal in question involved Bankman-Fried purchasing Binance and Zhao's stake in FTX back in July 2021, using a combination of FTX's native token, FTT, and Binance-issued coins BNB and BUSD, which at the time were valued at approximately $1.76 billion. This purchase was facilitated by Bankman-Fried's trading firm, Alameda Research, which, as revealed in the court documents, was already insolvent and had to borrow from FTX to complete the transaction. According to the lawsuit, since FTX itself was insolvent and the FTT tokens used in the transaction were essentially worthless, the deal should be considered fraudulent.
The events leading to this lawsuit began unfolding in November 2022, when FTX filed for bankruptcy following the exposure of irregularities in its balance sheet and its relationship with Alameda. This was further complicated by Binance and Zhao selling off their significant holdings of FTT, which led to a crash in its value and exacerbated FTX's financial woes.
FTX claims that Zhao intentionally sought to undermine his competitor through a series of tweets that were false, misleading, and fraudulent, thereby destroying potential recoverable value for FTX stakeholders. In response to these allegations, a Binance spokesperson has stated that the claims are baseless and will be vigorously defended. The lawsuit marks another chapter in the dramatic downfall of FTX and its former CEO, who was recently sentenced to 25 years in prison on multiple counts of fraud.