FTX has filed a new, blockbuster lawsuit against Binance and its ex-CEO Changpeng Zhao, also known as CZ, for $1.8 billion in damages. The lawsuit blames Binance and Zhao for FTX’s implosion because they indulged in fraudulent activities, especially regarding a 2021 share repurchase deal. The case is part of FTX’s broader legal campaign to recover assets for creditors after its high-profile collapse.
Zhao’s Tweet and Events Leading to FTX’s Downfall
In a tweet on November 6, 2022, Zhao announced that Binance would sell its large FTT holdings, resulting in a massive sell-off of the FTT tokens. These sell-offs drastically brought down the value of FTT and plunged FTX into an acute liquidity crisis. The deluge of withdrawals that followed forced FTX into bankruptcy.
https://twitter.com/cz_binance/status/1589374530413215744
The lawsuit pins Zhao’s tweet as an intentional act to destabilize FTX. Zhao’s tweet has been pointed out as one of the seminal factors in FTX’s fall, but the estate of FTX refers to all these issues as part of a greater scheme of fraud and mismanagement by executives at FTX.
Larger Asset Recovery Legal Campaign by FTX Estate
This lawsuit filed by FTX against Binance and Zhao is one among over 20, all filed with the hope that some money can be recovered for the company’s creditors. In fact, the estate has filed suit against several people and firms that it believes are responsible for causing the exchange’s financial implosion. Other notable filings include suits filed against former FTX allies, such as KuCoin and Aleksandr Ivanov, the founder of the Waves blockchain platform.
Alameda Research’s Lawsuit Against Waves Founder
FTX’s affiliate also filed a lawsuit against Alameda Research over $90 million in assets it claims were siphoned by Waves founder Aleksandr Ivanov. Court records demonstrated that Ivanov and related entities misappropriated money from Alameda through secret deals on the Vires Finance platform.
The lawsuit charged Ivanov with inflating the value of WAVES tokens to siphon the funds. In spite of repeated attempts by Alameda to retrieve the frozen assets, Ivanov reportedly brushed off outreach efforts.
Aggressive Recovery Efforts by the FTX Estate
The recovery by FTX represents one of the most extensive asset clawbacks in crypto history. In its bid to refund the affected creditors, including institutional investors and individual account holders who lost a fortune, FTX targets, among others, influential figures like SkyBridge Capital’s CEO, Anthony Scaramucci, and other former executives of the exchange.
News of the lawsuits has affected cryptocurrency prices. Binance Coin, or BNB, fell nearly 2% and was trading at around $619.60. WAVES jumped up about 2.29% and was trading at $1.14.
Conclusion
The FTX lawsuit against Binance and Changpeng Zhao forms part of the company’s dogged attempt to recover assets and deliver accountability for its collapse. With every lawsuit filed, the underlying commitment of the FTX estate is to hold entities accountable, recover the assets, and give a probable route to compensation for its creditors.
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