FTX Files $1.8 Billion Lawsuit Against Binance Over Share Buyback Deal

Bankrupt Crypto Exchange Claims Fraudulent Transfer in 2021 Transaction

The bankrupt cryptocurrency exchange FTX launched a legal battle against industry rival Binance on November 11, 2024, seeking to recover $1.8 billion allegedly transferred fraudulently during a 2021 share buyback transaction. The lawsuit, filed in Delaware, targets both Binance and its former CEO Changpeng Zhao, claiming that FTX’s now-defunct trading arm Alameda Research was insolvent when it funded the share repurchase. This legal action marks the latest development in the ongoing aftermath of FTX’s collapse in late 2022, which led to criminal convictions of both companies’ former leaders.

5 Key Points

• FTX administrators claim $1.76 billion in tokens were fraudulently transferred to Binance and its executives.
• The disputed transaction involves Binance’s sale of its FTX stake acquired in 2019.
• Alameda Research allegedly funded the share buyback while insolvent in July 2021.
• Former FTX CEO Sam Bankman-Fried serves 25 years in prison for stealing $8 billion from customers.
• Binance’s spokesperson called the claims “meritless.”

Background of the FTX-Binance Relationship

Binance invested in FTX in 2019, establishing a stake in what would become one of the world’s largest cryptocurrency exchanges. The relationship shifted in July 2021 when FTX initiated the share buyback agreement through its trading division, Alameda Research. The division provided tokens valued at $1.76 billion to repurchase Binance’s stake. FTX administrators now assert that Alameda Research operated while insolvent during this transaction, invalidating the entire transfer under bankruptcy law.

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The Collapse and Criminal Proceedings

FTX’s November 2022 collapse triggered investigations that revealed widespread financial misconduct. Courts convicted founder Sam Bankman-Fried of stealing $8 billion in customer funds, leading to his 25-year prison sentence in March 2024. Former Binance CEO Changpeng Zhao pleaded guilty to money laundering violations at his cryptocurrency exchange, resulting in a four-month prison term. These criminal cases exposed fundamental problems within the operations of both cryptocurrency exchanges.

Legal Claims and Response

The Delaware filing outlines FTX’s demands for both compensatory and punitive damages beyond the $1.76 billion transfer. “By this lawsuit, the Plaintiffs seek to recover, for the benefit of FTX’s creditors, at least $1.76 billion that was fraudulently transferred to Binance and its executives at the FTX creditors’ expense,” the filing states. Binance challenged these allegations through their spokesperson: “The claims are meritless, and we will vigorously defend ourselves.”