FTX sues Binance and founder Changpeng Zhao for $1.8bn

Two former crypto barons are once again embroiled in a skirmish as FTX sues Binance for $1.8 billion.
Lawyers acting for the collapsed crypto exchange FTX allege that Changpeng Zhao of Binance “maliciously calculated” to push his rival Sam Bankman-Fried’s business to collapse through posts on X.
They claim that tweets by Zhao, known in the industry as CZ, in the run-up to the collapse of the Bahamas-based FTX were “false, misleading and fraudulent”, that FTX was a “clear threat” to Binance’s market dominance and that Zhao set out to “destroy his rival … with reckless disregard to the harm that FTX’s customers and creditors would suffer”.
Zhao’s tweets, lawyers wrote, “triggered a predictable avalanche of withdrawals at FTX — theproverbial run on the bank that Zhao knew would cause FTX to collapse”.
They claimed a share deal, in which Binance sold its 20 per cent stake in FTX back to the business in exchange for $1.76 billion of digital tokens, should never have taken place.
Court filings claim FTX was not solvent during the transaction and could not afford it and so the deal was “a constructive fraudulent transfer”.
Although Bankman-Fried told journalists the share sale was funded by its hedge fund Alameda, it was in fact paid for by FTX customer deposits, the court documents said.
FTX filed for bankruptcy in November 2022 after it faced billions in customer withdrawals. Binance backed out of a proposed rescue deal because it said that FTX’s problems were beyond its “ability to help”.
FTX was launched by Bankman-Fried in 2019 and rapidly became one of the biggest players in the industry with a valuation of $32 billion and more than a million users.
After it collapsed, an extraordinary story emerged of what US prosecutors called “one of the largest financial frauds in history”; a business with few financial controls, run from a penthouse in the Bahamas, where customer funds were freely used, including to buy holiday homes for staff.
In March, Bankman-Fried was sentenced to 25 years in prison for fraud. After his departure, John Ray took over to try to claw back funds for the exchange’s customers. The turnaround specialist was known for working on the bankruptcy of Enron.
A Binance spokesman said: “The claims are meritless and we will vigorously defend ourselves.”
Binance was founded by Zhao in 2017 and is the largest cryptocurrency exchange in the world by trading volume, with more than $100 trillion having gone through the business.
Zhao was sentenced to four months in prison in the US in April this year, after Binance pleaded guilty for failing to implement anti-money laundering and sanctions policies, which “allowed money to flow to terrorists, cybercriminals and child abusers through its platform”, according to the US Treasury secretary.
The billionaire is no longer chief executive of the company but he remains Binance’s largest shareholder.