The liquidators of the defunct cryptocurrency exchange platform FTX have taken their former competitor, Binance, to court, demanding just under $1.8 billion, an amount received as part of a transaction they consider illegal.
Former Binance runner-up FTX filed for bankruptcy in November 2022, the victim of mass withdrawals from customers terrified by revelations about the platform’s management.
At the end of a five-week trial, FTX co-founder and major shareholder Sam Bankman-Fried was sentenced, in March 2024, to twenty-five years in prison for fraud and criminal conspiracy. At the time of FTX’s implosion, nearly $9 billion in customer deposits had disappeared from the company’s coffers, used by another company, Alameda, without investors’ knowledge.
The liquidation plan was approved in early October by federal judge John Dorsey. It anticipates that the platform’s clients will recover more than what they were owed, something unusual in a procedure of this type.
However, the liquidators do not want to stop there and have referred the matter to the federal court in Delaware specialized in business bankruptcies, according to a summons dated Sunday, November 10 and consulted by Agence France-Presse (AFP).
They accuse Binance of having sold the 20% that the group had in the capital of its competitor to FTX for $1.76 billion in July 2021, when the platform should have already been considered insolvent.
Sending “a false signal of strength to the market”
According to the testimony of a former Alameda executive, Caroline Ellison, who was Sam Bankman-Fried’s girlfriend, approximately $1 billion in customer deposits were used to carry out this transaction, without the authorization of the interested parties. According to the call document, Sam Bankman-Fried wanted to buy back the stake acquired by Binance in November 2019 to send “a false sign of strength for the market”.
“These accusations are unfounded and we will defend ourselves with determination”a Binance spokesperson reacted to AFP. Liquidators accuse Binance founder and former boss Changpeng Zhao of attempting ” destroy “ FTX, in particular through a series of tweets in November 2022, which contributed to the downfall of its competitor.
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Changpeng Zhao pleaded guilty to violating US money laundering laws in November 2023. As part of a deal with the US government, he agreed to resign. He was sentenced to four months in prison in April and released in September.
