- FTX sues Binance and CZ for $1.8 billion over a 2021 share repurchase deal
- CZ bought 20% of FTX for $80 million in 2019, sold it back for $2.2 billion in 2021
- FTX claims the repurchase was fraudulent as FTX was insolvent at the time
- The lawsuit alleges CZ’s November 2022 tweets about selling FTT tokens led to FTX’s collapse
- Customers withdrew over $5 billion following CZ’s announcement to liquidate FTT holdings
FTX Demands $1.8B Clawback from Binance Share Buyout
Bankrupt cryptocurrency exchange FTX has initiated legal action against Binance and its former CEO Changpeng Zhao.
The lawsuit aims to recover $1.8 billion from a 2021 share repurchase transaction.
The Controversial Share Deal
The dispute centers around a 2019 investment where Changpeng Zhao acquired a 20% stake in FTX for $80 million.
Sam Bankman-Fried later repurchased these shares in July 2021 for $2.2 billion, representing a massive return on investment for Binance.
At the time, Bankman-Fried stated to Decrypt that the buyback "just makes sense" and was anticipated by both parties.
Legal Claims and Allegations
The Delaware bankruptcy court filing states that both FTX and Alameda Research were balance-sheet insolvent by early 2021.
This insolvency claim forms the basis for FTX’s argument that the share repurchase was fraudulent.
The lawsuit details a "cold war" between Bankman-Fried and Zhao, as mentioned in Michael Lewis’ book "Going Infinite".
The November 2022 Collapse
The situation intensified after CoinDesk revealed that Alameda’s balance sheet was primarily supported by FTX’s FTT token.
Zhao announced Binance’s intention to liquidate $550 million worth of FTT tokens.
This announcement triggered a mass Exodus of customer funds, with $2 billion withdrawn in a single day.
The total withdrawals exceeded $5 billion within 24 hours.
FTT’s value plummeted from $22 to $7.
The lawsuit characterizes Zhao’s social media statements as "false, misleading, and fraudulent tweets" designed to harm FTX.
The legal battle represents the latest chapter in the ongoing aftermath of FTX’s collapse, with potential implications for the broader cryptocurrency industry.
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