FTX Bankruptcy Estate Files $1.8 Billion Lawsuit Against Binance Over Alleged Fraudulent Transfer

In a filing on November 10, the complaint accuses Binance executives of receiving a substantial $1.76 billion in a “fraudulent transfer” tied to a repurchase deal made in July 2021 with FTX’s co-founder, Sam Bankman-Fried.

The lawsuit claims that Bankman-Fried, who is now serving a 25-year prison sentence, used FTX and Alameda Research assets, specifically FTX Token (FTT), Binance’s BNB, and Binance USD (BUSD), to pay for a stock buyback from Binance. The repurchase involved a 20% stake in FTX International and an 18.4% share in FTX’s U.S.-based subsidiary, West Realm Shires Services, known as FTX US. The deal’s value at the time was $1.76 billion.

According to the bankruptcy estate, FTX and its associated entities may have been insolvent from the very beginning and were definitively balance-sheet insolvent by early 2021. This financial instability renders the share repurchase deal fraudulent, as the estate argues the funds should not have been transferred given FTX’s compromised financial state.

Adding to the allegations, the lawsuit accuses Zhao of deliberately destabilizing FTX in 2022. It points to a November 6 tweet from Zhao announcing Binance’s intent to sell its FTT holdings, sparking a surge of withdrawals and effectively a “bank run” on FTX. The estate claims this move blocked FTX from securing critical alternative financing and was intended to harm its competitor.

Binance initially showed interest in acquiring FTX through a non-binding agreement but backed out shortly after, intensifying market panic. According to the complaint, this decision further destabilized FTX and ultimately led to its collapse.

The FTX estate’s aggressive pursuit of legal accountability comes amid recent developments involving FTX co-founder and former technology chief Gary Wang who filed a sentencing memo requesting no jail time, citing his substantial cooperation in the conviction of Sam Bankman-Fried. 

Wang’s testimony was central to the U.S. government’s case, which resulted in a 25-year sentence for Bankman-Fried. Wang’s memo argues that his role in the $10 billion fraud and FTX’s collapse was limited, as he primarily acted under Bankman-Fried’s directives, including altering FTX’s code to permit Alameda Research access to customer funds—a decision that significantly contributed to FTX’s downfall.

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