FTX files a lawsuit against Binance and CZ for “fraudulent tweets” and a $1.8B clawback

In order to reclaim $1.8 billion in shares that it alleges were unfairly repurchased by Sam Bankman-Fried in 2021, the bankrupt crypto exchange FTX has filed a lawsuit against its former chief Changpeng Zhao and its rival Binance.

Zhao acquired a 20% stake in FTX for $80 million in 2019. In July 2021, FTX repurchased the shares for $2.2 billion under the leadership of Bankman-Fried.

According to Bankman-Fried, the repurchase was “logical” at the time. He stated to Decrypt that he and Zhao “had been anticipating that it would proceed in that direction for a while, and it seems like a suitable moment to proceed and complete the task.”

“It is evident that they executed the investment quite well, so I am inclined to believe that it was a success for them.”

On Sunday, FTX filed a complaint in Delaware bankruptcy court, asserting that the transaction was fraudulent due to the fact that FTX and its trading firm, Alameda Research, were “balance-sheet destitute” by early 2021 (Bloomberg).

In the Decrypt interview, Bankman-Fried also hinted at Binance’s regulatory scrutiny issues. In a much later interview for Michael Lewis’ book, Going Infinite, Bankman-Fried stated that the repurchase had sparked a “cold war” between the two, resulting in a series of thinly veiled threats exchanged via Twitter.

Zhao’s involvement in FTX’s collapse is further alleged in the complaint filed on Sunday by FTX, which pertains to this “cold war.” Zhao stated on Twitter that Binance intends to liquidate its remaining $550 million worth of FTT in response to CoinDesk’s incriminating article on November 2, 2022, which alleged that Alameda’s balance sheet is supported by FTX’s FTT token.

In that single day, customers withdrew an astonishing $2 billion in funds. There was a withdrawal of more than $5 billion by November 5, the following day. The value of FTT decreased from $22 to $7.

The FTX complaint alleges that Zhao’s series of “false, deceitful, and fraudulent tweets” were “maliciously calculated to demolish his rival.”

Also Read: Alameda Research sues Waves creator for $90M ‘aggressive’ lawsuit