FTX Blasts Binance’s ‘Campaign to Destroy’ in $1.8 Billion Lawsuit

FTX is suing cryptocurrency giant Binance and its former CEO for $1.8 billion.

The lawsuit, filed Sunday (Nov. 10) by the FTX bankruptcy estate, centers around what FTX labeled a “fraudulent” share deal. It also accuses ex-Binance chief executive Chanpeng Zhao of orchestrating a “campaign to destroy” his one-time rival crypto exchange.

The share deal happened in July of 2021, when Binance, Zhao and other executives sold a 20% stake in FTX back to the company for $1.7 billion in crypto. The suit argues that the transaction — part of a deal made with FTX founder/convicted fraudster Sam Bankman-Fried — should not have gone forward.

According to the suit, FTX and sister company Alameda Research “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021,” and thus the resale deal should not have been permitted.

“The claims are meritless, and we will vigorously defend ourselves,” a Binance spokesperson said in a statement issued to PYMNTS Monday (Nov. 11) morning.

Meanwhile, the suit also claims that Zhao tried to undermine FTX via a “months-long coordinated FUD [fear, uncertainty and doubt] campaign against FTX” in 2022. This involved leaking financial information about Alameda to crypto news outlet CoinDesk, as well as “misleading” statements by Zhao on social media, the suit says.

Binance had announced in November of 2022 that it was going to begin liquidating its holdings of FTX’s FTT token.

“A competitor is trying to go after us with false rumors,” Bankman-Fried said on Twitter soon after. “FTX is fine. Assets are fine.”

Later, Binance emerged as a possible rescuer, with the heads of the two companies announcing a deal for Binance to acquire its rival.

However, that deal fell apart the following day, with Binance saying that its due diligence — along with reports of mishandled customer funds at FTX — had led it to walk away from the purchase.

The Binance suit is the latest in a series of actions by FTX to recover lost funds for its creditors. Last week, the company filed suit against former Trump administration official Anthony Scaramucci and his company SkyBridge Capital.

That action claims that FTX hopes to claw back money that was part of “a campaign of influence-buying” by Bankman-Fried, carried out as the company was struggling to meet its cash flow needs.

“These ‘investments’ conveyed little to no benefit to Debtors, and instead served only to prop up Bankman-Fried’s standing in the worlds of politics and traditional finance,” the suit says, adding he then attempted to leverage as “potential sources of equity investment in FTX to fill the hole in the balance sheet and, therefore, keep his scheme afloat.”