As the cryptocurrency market enjoyed a recent surge, Binance found itself facing renewed legal challenges. FTX, the bankrupt crypto exchange, has filed a $1.8 billion lawsuit against Binance Holdings Ltd. and its former CEO Changpeng Zhao (CZ). This case traces back to a buyback agreement between FTX and Binance, dating to July 2021, which has become the subject of intense legal scrutiny.
Origins of the $1.8 Billion Lawsuit
The lawsuit’s roots lie in a buyback agreement from 2021, where FTX co-founder Sam Bankman-Fried (SBF) arranged for Binance and its officials, including CZ, to sell their stake in FTX. At the time, Binance held approximately 20% of FTX’s international business and 18.4% of its U.S.-based corporation. FTX used a combination of its own exchange token, FTT, and Binance-branded tokens BNB and BUSD—worth around $1.76 billion at the time—to buy back the shares.
The lawsuit also implicates FTX’s affiliate, Alameda Research, alleging it may have been insolvent from its inception. By early 2021, FTX’s filing claims, Alameda was “certainly” insolvent according to its balance sheet.
Allegations Against Changpeng Zhao
FTX’s filing doesn’t stop at the buyback agreement. It alleges that CZ and Binance aimed to destabilize FTX leading up to its collapse. Prior to FTX’s downfall, CZ allegedly posted “false, misleading, and fraudulent” tweets aimed at undermining FTX. According to FTX, CZ’s social media posts were “maliciously calculated to destroy his rival.”
On November 6, 2022, Zhao announced Binance’s plans to sell its FTT tokens, valued at roughly $529 million. The news triggered a rush of withdrawals from FTX, which eventually spiraled into the exchange’s bankruptcy filing days later.
Impact on Binance’s BNB Token
Amid this lawsuit, Binance’s native cryptocurrency, BNB, has been affected, dropping around 2% in the past 24 hours to $621.27. While the broader crypto market remains on an upswing, BNB’s decline appears tied to the legal troubles facing Binance and its leadership.
As FTX’s case against Binance unfolds, the lawsuit’s impact on the crypto industry’s two largest exchanges will be closely watched, particularly as Binance navigates its ongoing legal challenges.
