FTX sues Binance and Changpeng Zhao for $1.8 billion over alleged financial sabotage Bankruptcy 6 hours ago

Bankrupt crypto exchange FTX has filed a lawsuit against Binance and its former CEO, Changpeng Zhao, seeking to reclaim approximately $1.8 billion.According to a Nov. 10 court filing, FTX alleges a complex series of actions that contributed to its financial downfall, placing Binance’s early involvement and Zhao’s actions in the spotlight.So, through this lawsuit, FTX aims to hold Binance and Zhao accountable for what it describes as actions that decimated its financial stability, resulting in significant losses for its stakeholdersIn November 2019, Binance acquired a 20% stake in FTX, then a new exchange launched by Sam Bankman-Fried. Binance made this purchase using 1,002,739 BNB tokens, strengthening its position as one of the exchange’s key stakeholders.By 2020, Binance expanded its investment by purchasing an 18.4% stake in FTX’s US affiliate, West Realm Shires (WRS), for $2, marking a deepening partnership between the two exchanges.However, by 2021, personal tensions between Zhao and Bankman-Fried reportedly drove Binance to exit its investment in FTX and WRS.The filing revealed that FTX agreed to buy back Binance’s shares through its affiliate Alameda Research. The transaction was funded with FTX’s FTT token, BNB, and Binance’s stablecoin, BUSD. This share repurchase was valued at around $1.76 billion.FTX now contends that Alameda was insolvent at the time of the transaction and should not have funded the buyback. The exchange cited testimony from the trading firm’s former CEO, Caroline Ellison, who testified that she warned Bankman-Fried about the lack of funds to support the buyback.Despite these concerns, Bankman-Fried reportedly insisted on completing the transaction, emphasizing its strategic importance even if it required using depositor funds. Ellison claims Alameda ultimately financed the buyback with approximately $1 billion from FTX’s depositor base.According to the exchange:“The FTX Trading shares acquired through the share repurchase were actually worthless based on a proper accounting of FTX Trading’s assets and liabilities.”After Binance’s exit, FTX alleged that Zhao engaged in actions designed to harm its market position.The bankrupt firm stated that Zhao’s tweets following reports about Alameda’s financial condition sparked fears around FTX’s stability and led to a sharp increase in customer withdrawals.Furthermore, FTX alleges that Zhao’s continued tweets obstructed FTX’s efforts to secure emergency funding to stem the withdrawal surge.In conclusion, the firm stated that these public statements created a liquidity crisis that ultimately led to its collapse.FTX alleged:“Collectively and individually, these false public statements destroyed value that would have otherwise been recoverable by FTX’s stakeholders.”Oluwapelumi values Bitcoin’s potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.Also known as “Akiba,” Liam Wright is the Editor-in-Chief at CryptoSlate and host of the SlateCast. He believes that decentralized technology has the potential to make widespread positive change. Essential crypto updates and analyses. Straight to your inbox, every day.Digital asset funds reach $116B as Bitcoin and US inflows demonstrate growing market confidence.Shareholders benefit from Bitcoin strategy as MicroStrategy’s average acquisition cost remains significantly below market value.a16z envisions decentralized innovation flourishing with upcoming crypto-friendly frameworks.The crypto industry expects better days ahead with Trump at the helm if the president elect delivers on his promises.Disclaimer: Our writers’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.