New Delhi

The collapsed cryptocurrency company FTX is suing Binance and its former CEO Changpeng Zhao, alleging that $1.8bn was “fraudulently transferred” by FTX management to Binance and its executives according to a detailed report by The Guardian.

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The lawsuit relates to Binance’s sale of its stake in Sam Bankman-Fried’s FTX, which it acquired in 2019 but then negotiated to sell back to FTX in July 2021, The Guardian report explained further.

According to the lawsuit, FTX’s Alameda Research division directly funded the share repurchase using tokens which had a then fair market value of $1.76bn. Alameda, the lawsuit alleges, was insolvent at the time of buying the shares and could not therefore afford to fund the transaction and it should not have been allowed to proceed.

“By this lawsuit, the Plaintiffs seek to recover, for the benefit of FTX’s creditors, at least $1.76 billion that was fraudulently transferred to Binance and its executives at the FTX creditors’ expense, as well as compensatory and punitive damages to be determined at trial,” the administrators for the FTX estate said in a filing made on Sunday in the US state of Delaware.

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A spokesperson for Binance has responded to the lawsuit, calling the claims "meritless" and emphasizing that the company will "vigorously defend" itself. Changpeng Zhao, also known as CZ, was not immediately available for comment, the Guardian report added further.

The lawsuit adds to the ongoing conflict between Binance and FTX, two of the largest cryptocurrency firms in the world. FTX, founded by Sam Bankman-Fried, collapsed in late 2022 amid allegations of financial mismanagement and fraud. Bankman-Fried was convicted in March 2024 of stealing $8 billion from customers and was sentenced to 25 years in prison. He has since appealed the conviction.

Binance, led by Zhao at the time, was initially prepared to help FTX by acquiring its non-US operations when the firm faced a liquidity crisis in November 2022. However, Binance withdrew its offer, further contributing to FTX’s downfall. Earlier this year, Zhao himself was sentenced to four months in prison after pleading guilty to violating U.S. anti-money laundering laws related to Binance's operations.

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These legal battles between Binance and FTX reflect the broader turmoil and regulatory scrutiny facing the cryptocurrency industry. The ongoing disputes between the two companies underscore the challenges of navigating a volatile and often murky digital asset landscape.

Market participants and investors will closely follow these developments as they will help them in making informed investment decisions with regards to investments in cryptocurrencies.