The bankrupt cryptocurrency exchange FTX has initiated legal proceedings against its competitor Binance and its former CEO, Changpeng “CZ” Zhao.
This action stems from allegations that FTX’s former CEO, Sam Bankman-Fried, engaged in a fraudulent buyout of Binance’s shares in FTX back in July 2021. Bankman-Fried’s plan involved using FTX’s own token, FTT, along with Binance’s coins, BSB and BUSD, to fund a purchase valued at approximately $1.76 billion.
However, the deal was backed by Alameda Research, Bankman-Fried’s trading firm, which was already facing insolvency. Caroline Ellison, Alameda’s second-in-command, reportedly expressed concerns about the lack of funds, suggesting they would need to borrow from FTX to proceed with the purchase. The legal filing claims that FTX was insolvent and that the FTT tokens had lost their value at the time of the transaction, categorizing the deal as fraudulent.
FTX’s downfall became public in November 2022 when CoinDesk revealed discrepancies in the financial dealings between FTX and Alameda. Earlier this year, Bankman-Fried was sentenced to 25 years in prison for multiple fraud-related charges.
The situation was exacerbated when Binance and Zhao sold off their significant FTT holdings, which contributed to a sharp decline in its value and further destabilized it.
