Crypto Clash: FTX Estate Takes Legal Aim at Binance Over Alleged Fraudulent Deal

The estate of now-defunct crypto exchange FTX has initiated legal action against Binance and its former CEO Changpeng Zhao, seeking to reclaim over $1.76 billion. The lawsuit asserts that a 2021 transaction in which Binance divested its investment in FTX by selling a 20% stake in the platform along with an 18.4% stake in its U.S.-based entity, West Realm Shires, involved a “fraudulent” share deal.

Filed in Delaware, the suit alleges that the transaction was funded by FTX’s Alameda Research arm, relying heavily on both FTX’s and Binance’s proprietary tokens and Binance’s stablecoin pegged to the U.S. dollar. The FTX estate contends that Alameda was insolvent at the time and thus unable to finance the deal, deeming the transaction a “constructive fraudulent transfer” orchestrated by FTX co-founder Sam Bankman-Fried, who is now serving a 25-year sentence for fraud associated with the exchange’s collapse.

In response, Binance dismissed the allegations, calling them “meritless” and pledging to “vigorously defend” against them.

This litigation underscores escalating tensions between two leading figures in the cryptocurrency industry. FTX, once valued at $32 billion, unraveled spectacularly after a wave of customer withdrawals overwhelmed the platform, causing shockwaves in crypto markets. The collapse reached a critical point last November when Bankman-Fried was convicted on seven criminal fraud counts related to FTX’s bankruptcy and the misappropriation of customer assets.

During the same period, Zhao admitted to violating the Bank Secrecy Act for failing to establish effective anti-money laundering protocols and breaching U.S. economic sanctions.

The lawsuit also accuses Zhao of making “false and misleading statements” on social media, which allegedly set off a chain reaction of withdrawals from FTX. Specifically, the suit references a post Zhao made on November 6 on X, where he suggested that Binance’s decision to liquidate FTX Token (FTT) holdings was a post-divestment “risk management” decision, likening it to lessons learned from other recent crypto failures.

Have you read?
Best CEOs.
Best Companies.
Richest People (Billionaire).
Richest Women (Billionaire).
Richest in Each Country (Billionaire).