The administrators of collapsed cryptocurrency exchange FTX have launched legal proceedings against the world’s largest crypto exchange Binance and its founder Changpeng ‘CZ’ Zhao.
FTX is alleging that Binance committed fraudulent actions and market manipulation that contributed to FTX’s financial collapse in 2022.
Filings in the United States Bankruptcy Court in Delaware accuse Binance of receiving over $1.76 billion in a share buyback deal in 2021 while FTX was insolvent.
The complaint asserts that Binance and its executives leveraged customer deposits from FTX to complete this transfer, despite FTX’s deteriorating financial stability.
According to the filing, Binance acquired a 20% stake in FTX in 2019, which FTX repurchased in 2021.
FTX claims that CZ’s subsequent conduct, including “false, misleading, and fraudulent tweets”, led to a mass withdrawal of funds by FTX customers, escalating liquidity issues and pushing the exchange into insolvency.
The lawsuit alleges these actions were part of a broader strategy by CZ to undermine FTX and bolster Binance’s market share.
CZ was once seen as a mentor to disgraced FTX founder Sam Bankman-Fried, who is currently serving 25 years behind bars for committing large-scale fraud at FTX.
Their relationship came to a screeching halt in late-2022 after CZ grew weary of Bankman-Fried’s political lobbying.
Subsequent actions from CZ were generally seen as contributing to FTX and Bankman-Fried’s downfall.
CZ found himself at the mercy of the law earlier this year when he copped a four-month prison sentence for allowing money laundering to take place on Binance.
FTX is seeking to recover the $1.76 billion from Binance, along with compensatory and punitive damages.