According to a recent CoinDesk report, Bankrupt crypto exchange FTX has filed a lawsuit against Binance and former CEO Changpeng “CZ” Zhao, accusing them of a fraudulent share buyback scheme led by FTX’s former CEO, Sam Bankman-Fried. In July 2021, Bankman-Fried arranged for FTX to repurchase Binance and Zhao’s shares using FTX’s token, FTT, and Binance coins BNB and BUSD, valued at approximately $1.76 billion at the time.
The transaction was funded by Alameda Research, Bankman-Fried’s trading firm, despite Alameda’s insolvency. In a recent filing with the U.S. Bankruptcy Court for the District of Delaware, FTX’s former executive Caroline Ellison reportedly warned, “we don’t really have the money for this, we’ll have to borrow from FTX to do it.” The document alleges that FTX was already insolvent and the FTT tokens were effectively worthless, framing the transaction as fraudulent.
The lawsuit also claims Zhao damaged FTX’s reputation and its potential recovery for creditors by making “false, misleading and fraudulent” statements on social media. In response, Binance has dismissed the lawsuit as “meritless” and stated it will defend against the claims.
