FTX sues Binance and CZ for 'fraudulent tweets' and $1.8B clawback

Bankrupt crypto exchange FTX has sued rival Binance and its former chief Changpeng Zhao to recover $1.8 billion worth of shares that it says were wrongfully repurchased by Sam Bankman-Fried back in 2021.

In 2019, Zhao purchased a 20% share in FTX for $80 million. Under the leadership of Bankman-Fried, FTX repurchased the shares in July 2021 for $2.2 billion.

Bankman-Fried claimed at the time that the repurchase “just makes sense.” He told Decrypt that he and Zhao “had been expecting it would go in that direction for a little while, and now seems like a decent time to just go ahead and get it done.

“And obviously they did quite well on the investment as well, so I certainly think it’s been a win for them.”

However, in a complaint filed on Sunday in Delaware bankruptcy court, FTX claimed that because FTX and its trading firm Alameda Research were “balance-sheet insolvent by early 2021,” the deal was fraudulent (via Bloomberg).

FTX claims Binance’s CZ intended to “destroy his rival”

Bankman-Fried also eluded to Binance’s problems with regulatory scrutiny in the Decrypt interview. Indeed, in a much later interview for Michael Lewis’ book, Going Infinite, Bankman-Fried said the repurchase catalyzed a “cold war” between the pair, leading to a back-and-forth of thinly veiled threats via Twitter.

FTX’s complaint filed on Sunday addresses this “cold war” by further alleging that Zhao had a hand to play in FTX’s collapse. In response to CoinDesk’s damning article on November 2, 2022, which claimed that Alameda’s balance sheet is propped up by FTX’s FTT token, Zhao posted on Twitter that Binance intends to liquidate its remaining $550 million worth of FTT.

As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 BNB (@cz_binance) November 6, 2022

Read more: Binance founder CZ made $12B overnight when Donald Trump won

Customers withdrew a whopping $2 billion in funds that day. By the following day, November 5, over $5 billion had been withdrawn. FTT dropped in value from $22 to $7.

The FTX complaint says that Zhao’s series of “false, misleading, and fraudulent tweets” were “maliciously calculated to destroy his rival.”

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Source: https://protos.com/ftx-sues-binance-and-cz-for-fraudulent-tweets-and-1-8b-clawback/