FTX Estate Sues Binance to Recover $1.8B in Alleged Fraudulent Transfer

by

As a seasoned crypto investor with a knack for navigating the volatile digital asset market, I can’t help but feel a mix of intrigue and concern as the legal battle between FTX and Binance unfolds. With over a decade of experience under my belt, I’ve seen more than a few twists and turns in this space, but this one seems to be taking the cake.

In the course of handling FTX’s bankruptcy case, the estate has stepped up its pursuit to recover assets during the ongoing court proceedings, with Binance, a significant cryptocurrency exchange, being a key target. A lawsuit filed on November 10 alleges that Binance, its CEO Changpeng Zhao (CZ), and other high-ranking officials engaged in fraudulent activities against FTX.

According to the claimants, Binance and its top officials are accused of receiving approximately $1.76 billion in a deal that the estate has since categorized as potentially fraudulent.

FTX May Have Been Insolvent from Day One

The legal action traces back to a 2021 stock repurchase deal between the two crypto giants. Under the terms of that agreement, Sam Bankman-Fried (SBF), co-founder of FTX – now serving a 25-year prison sentence on separate charges – sold Binance a significant stake in both FTX International and its US arm, West Realm Shires Services, which traded as FTX US.  Specifically, the company sold approximately 20% of the international exchange and 18.4% of its US counterpart to Binance.

As a crypto investor, I’d like to share an interesting event that happened involving Binance Coin (BNB) and FTX’s native token, FTT. It appears that SBF, the person in question, later acquired shares using these tokens, along with Binance USD, during a transaction valued at approximately $1.76 billion. However, it’s important to note that this transaction took place when FTX and its sister company, Alameda Research, were reportedly financially unstable according to the latest lawsuit claims. Here are some key details about BNB:

According to the court filing made by the estate, it is suggested that FTX and Alameda might have been financially insolvent from their start. Moreover, the document points out that by the beginning of 2021, both entities had become insolvent in terms of their financial statements. As a consequence, the estate asserts that this transfer was a fraudulent transaction intended to favor Binance at the expense of FTX’s customers and creditors.

SBF Accused CZ of Playing Him

This recent legal move is one step in a larger strategy by the FTX bankruptcy team to retrieve funds that were misplaced due to the intricate financial issues surrounding the exchange’s demise. The fall of FTX, previously worth billions, has caused ripples across the cryptocurrency sector, leading to intense probes, lawsuits, and a renewed focus on safety measures within the industry.

Initially under the guidance of CZ, Binance was both an associate and financier of FTX. However, their relationship started to strain prior to FTX’s sudden downfall in late 2022. At the onset of FTX’s liquidity predicament, CZ and SBF had discussions about a buyout, but this arrangement didn’t succeed in the end. Binance later disclosed that the financial difficulties at FTX were too severe for them to manage.

In simpler terms, Binance expressed that their objective was to aid FTX’s users and maintain liquidity, but the challenges they faced exceeded what they could manage or influence.

After the collapsed agreement, SBF pointed fingers at CZ, alleging that the current Binance CEO had intentionally deceived him, contributing to FTX’s collapse.

In a nutshell, here’s what SBF implied: “I suspect he deceived me, and he was quite skillful at it. I believe he surpassed his own expectations. I don’t think he predicted the turn of events. He may have anticipated some harm, but not to this degree.

Read More

2024-11-11 15:51