Binance & CZ Face $1.8 Billion Lawsuit from FTX Estate

FTX is also suing SkyBridge Capital and founder Anthony Scaramucci to recover over $100 million. This lawsuit is one just of several that were filed by FTX’s bankruptcy estate over the past few weeks. Meanwhile, two OpenSea users dropped their class-action lawsuit after a judge allowed OpenSea to push the case into arbitration. Bitcoin Fog founder Roman Sterlingov was sentenced to 12.5 years for money laundering. The Department of Justice (DOJ) initially asked for a 20- to 30-year sentence.

FTX Bankruptcy Estate Targets Binance in Lawsuit

The FTX bankruptcy estate is still taking legal action against cryptocurrency firms as part of its ongoing bankruptcy proceedings, and its latest target is Binance. In a complaint that was filed on Nov. 10, a group of firms that are involved in the FTX bankruptcy proceedings accused Binance, along with its former CEO Changpeng ”CZ” Zhao as well as other executives, of receiving about $1.76 billion in crypto as part of a fraudulent transaction from FTX.

FTX bankruptcy estate’s complaint

The transaction in question dates back to July of 2021, when Binance repurchased shares from FTX’s co-founder, Sam Bankman-Fried. SBF is currently serving a 25-year prison sentence. Through this repurchase agreement, Bankman-Fried sold Binance his approximately 20% stake in FTX’s international operations and an 18.4% share in FTX’s US-based branch, West Realm Shires Services, which was also known as FTX US.

According to the complaint, Bankman-Fried financed this share repurchase using a combination of FTX’s native cryptocurrency, FTX Token (FTT), alongside Binance’s BNB token and Binance USD (BUSD). These assets were valued at $1.76 billion at the time of the transaction. 

However, the FTX bankruptcy estate now claims that FTX and its associated trading arm, Alameda Research, were very likely insolvent from their inception and were undeniably insolvent by early 2021. This alleged insolvency renders the 2021 share repurchase agreement fraudulent.

FTX Estate Sues SkyBridge

The FTX bankruptcy estate also filed a lawsuit to recover more than $100 million from SkyBridge Capital and its founder Anthony Scaramucci. One of the main goals of the lawsuit is to reclaim funds that were spent by Sam Bankman-Fried on sponsorships and investments with Scaramucci and SkyBridge in 2022. 

According to a Nov. 8 legal filing, Bankman-Fried initiated several financial partnerships with SkyBridge before FTX’s collapse. It all started with a $12 million sponsorship for Scaramucci’s SALT conference in January of 2022. After this, he directed Alameda Research to invest $10 million in the SkyBridge Coin Fund by March of 2022.

In September 2022, FTX bought a 30% share in the operating companies managing SkyBridge investment vehicles for $45 million. FTX’s legal team argues that the deal lacked financial rationale, and pointed out that FTX could have directly purchased the cryptocurrency holdings for a lower cost. Internal FTX employees also reportedly questioned the decision, especially as Alameda Research invested in a third-party manager with less industry experience.

The complaint also accuses SkyBridge of violating contract terms by selling a portion of the digital assets in 2023 without securing FTX’s consent, which was a requirement that was outlined in the agreement. The assets included primarily Bitcoin (BTC) and Solana (SOL), and are valued at about $120 million today. At the time of the ‘unauthorized’ sale in 2023, they were worth closer to $60 million.

This lawsuit is just one of several that were filed by FTX’s bankruptcy estate over the past few weeks. On Oct. 28, FTX sued KuCoin to reclaim more than $50 million in assets that were frozen by the exchange in 2022. On Nov. 7, FTX filed another lawsuit against Crypto.com to recover more than $11 million in assets held by the platform since last year.

OpenSea Users Drop NFT Securities Lawsuit

FTX is not doing all the suing in the crypto and blockchain industry. Two OpenSea users, Anthony Shnayderman and Itai Bronshtein, decided to withdraw their class-action lawsuit against the NFT marketplace after a judge allowed OpenSea to push the case into arbitration. 

On Nov. 7, the two plaintiffs filed a voluntary dismissal of their securities suit in a Florida federal court after Judge Cecilia Altonaga allowed OpenSea to demand arbitration. This was done because the users agreed to its terms of use, which mandated that all claims be settled by an arbitrator. OpenSea revealed that it planned to stick with arbitration in an October filing. The company also stated that it will appeal any court denial, which effectively put the case on hold.

Shnayderman and Bronshtein’s attorney, Adam Moskowitz, shared that the decision to drop the case was made reluctantly, as the primary goal was to establish a legal framework for creating a global NFT marketplace. Moskowitz stated that they still believe OpenSea has a role to play in overseeing NFT trades on its platform and in supporting those who have suffered losses from failed NFTs.

The original lawsuit was filed in September, and accused OpenSea of selling unregistered securities by allowing the sale of NFTs they claimed were worthless because of their alleged illegal nature. The plaintiffs referred to OpenSea’s disclosure of a Securities and Exchange Commission (SEC) Wells notice in August, which suggested that the marketplace could face an enforcement action. They argued that this notice pointed to potential liability for facilitating unregistered securities trades.

The plaintiffs also referenced the SEC’s actions against other NFT projects, like Stoner Cats 2 and Impact Theory, where the regulator classified NFTs as unregistered securities. In response to the initial lawsuit, OpenSea called the claims “baseless,” as a class-action suit based on the SEC Wells notice did not validate the accusations. 

Bitcoin Fog Founder Sentenced to 12.5 Years

In other legal news, Roman Sterlingov was sentenced to 12.5 years in prison. Sterlingov was the founder of the darknet’s oldest cryptocurrency mixer called Bitcoin Fog. This sentence follows his March conviction for money laundering, conspiracy, and operating an unlicensed money-transmitting business. 

The Department of Justice (DOJ) initially asked for a 20- to 30-year sentence, and argued that Bitcoin Fog was widely used by criminals to launder illicit proceeds. It is estimated that more than 1.2 million Bitcoin, which was valued at around $400 million at the time, was processed through the service.

Roman Sterlingov

In addition to his prison term, Sterlingov is required to pay a forfeiture judgment of $395.5 million and to surrender seized cryptocurrency and funds worth $1.76 million. Throughout his trial, Sterlingov claimed that he was merely a user of Bitcoin Fog, not its operator. However, the DOJ described the mixer as a “go-to” platform for criminals looking to obscure their financial transactions from law enforcement.

Critics of the case, including commentator “L0la L33tz,” called the verdict a “grave miscarriage of justice,” and argued that it represents a government attack on financial privacy. Crypto analyst Mario Nawfal’s show, Roundtable, also commented that the sentence sends a very clear warning to other mixers. Those involved in questionable activities could face serious legal repercussions.

This sentencing happened as the U.S. government continues to pursue legal actions against other crypto mixer founders. Roman Storm, co-founder of Tornado Cash, will not face trial for money laundering and sanctions violations until April of 2025. Keonne Rodriguez, who is associated with Samourai Wallet, pleaded not guilty in April to money laundering charges and was released on bail.