The estate of bankrupt %Cryptocurrency exchange FTX has launched a $1.76 billion U.S. lawsuit against rival %Binance and its former chief executive officer (CEO) Changpeng Zhao.
The lawsuit is seeking damages for what FTX calls a “fraudulent” share deal that involved Binance and its former CEO, Canadian entrepreneur Changpeng Zhao, who is known as “CZ.”
The lawsuit cites a 2021 transaction in which Binance, Zhao, and others exited their investment in FTX, selling a 20% stake in the platform and an 18.4% stake in its U.S.-based entity West Realm Shires back to the company.
The FTX estate alleges that the share repurchase was funded by FTX’s Alameda Research through a combination of the company’s and Binance’s exchange tokens, as well as Binance’s dollar-pegged %Stablecoin.
However, Alameda was insolvent at the time of the share repurchase and could not afford to fund the transaction, claims the lawsuit, which alleges the transaction amounted to a “constructive fraudulent transfer.”
Binance has denied the allegations and said that it will “vigorously defend” itself.
The litigation marks the latest escalation of tensions between two of the biggest crypto exchanges.
Once a $32 billion U.S. empire, FTX collapsed into bankruptcy when it was unable to manage a torrent of customer withdrawals, triggering a plunge in the crypto markets in late 2022.
FTX founder Sam Bankman-Fried has since been found guilty of seven criminal fraud counts and sentenced to 25 years in prison.
In addition to recovering funds, the latest lawsuit also accuses former Binance CEO CZ of “a series of false, misleading and fraudulent tweets” that it claims “triggered a predictable avalanche of withdrawals” that ultimately led to the collapse of FTX.
It is not clear when or if the lawsuit brought by the FTX estate will proceed to trial.
Binance is privately held and its stock does not trade on a public exchange.