FTX Sues Binance and its Former CEO CZ for $1.8B

​FTX has filed a lawsuit against Binance and its former CEO Changpeng Zhao (CZ), claiming that $1.8 billion was fraudulently transferred when Binance sold its FTX stake back to the now-defunct exchange in 2021. The lawsuit, filed in Delaware bankruptcy court, argues that the funds used in this deal originated from FTX’s trading division, Alameda Research, which was allegedly insolvent at the time and lacked the capital to complete the transaction legitimately.

The disputed transaction has its origins in a 2019 investment by Binance, which initially acquired a stake in FTX. However, in July 2021, Binance agreed to sell its shares back to FTX, reportedly receiving about $1.76 billion worth of FTX's FTT tokens and Binance's own BNB and BUSD tokens as payment. FTX administrators allege that Alameda, already financially troubled, used borrowed funds from FTX itself to complete this deal, which they now deem a "fraudulent transfer." The lawsuit claims that FTX's creditors were left at a disadvantage, and it seeks to recover the funds on their behalf.

Additionally, FTX accuses CZ of undermining FTX's stability by offloading Binance's large holdings of FTT tokens in November 2022, just before FTX collapsed. The filing suggests CZ made public statements that damaged FTX's reputation and contributed to its financial struggles, causing irreparable harm that ultimately led to the exchange's downfall. FTX's founder Sam Bankman-Fried was subsequently convicted of fraud, and his legal troubles underscore the intense scrutiny both exchanges face.

In response, Binance dismissed the allegations as baseless and vowed to contest the claims in court. This lawsuit further intensifies the strained relations between the two former industry giants, whose rivalry was heightened by FTX's collapse, a decline many attribute partly to Binance's actions.