Sending shockwaves across the cryptocurrency industry, FTX, the bankrupt crypto exchange, has filed a lawsuit against its competitor Binance and its former CEO Changpeng Zhao (CZ).
Filed on 10 November 2024, the lawsuit seeks $1.8 billion in damages, accusing Binance of playing a key role in it’s downfall.
Ellison stated that $ 1 billion of customer deposits were used to buy back the Binance stake
$2.3bn FTT, BUSD, BNB was used but fair market value of FTT is 0.
Claim is for $1.76bn pic.twitter.com/szBb4uQr0r— Sunil (FTX Creditor Champion) (@sunil_trades) November 11, 2024
FTX Sues Binance For Triggering A Liquidity Crises
FTX was once one of the largest cryptocurrency exchanges in the world, but it filed for bankruptcy in November 2022. Revelations of financial mismanagement and fraud remains the main reason behind its collapse.
Importantly, the company’s downfall led to billions of dollars in losses for investors and shaking public confidence in digital assets.
The lawsuit accused Binance and its former CEO Changpeng Zhao of engaging in actions that exacerbated FTX’s financial instability.
Specifically, FTX claims that Binance’s decision to sell off a large portion of its holdings in FTT—the native token of FTX—triggered a liquidity crisis that ultimately led to FTX’s collapse.
In early November 2022, Zhao publicly announced on Twitter (now X) that Binance would liquidate its entire position in FTT due to “recent revelations” about FTX’s financial health.
Liquidating our FTT is just post-exit risk management, learning from LUNA. We gave support before, but we won’t pretend to make love after divorce. We are not against anyone. But we won’t support people who lobby against other industry players behind their backs. Onwards.
— CZ BNB (@cz_binance) November 6, 2022
This announcement caused panic among investors, leading to a massive sell-off of FTT tokens.
Within days, FTX was unable to meet withdrawal demands from its users, which forced it to halt operations and eventually file for bankruptcy.
The lawsuit argues that Zhao’s actions were a calculated effort to destabilize a competitor. The exchange claims that Binance’s move was designed to create fear and uncertainty at a time when the company was already vulnerable.
Related : Former FTX Exec Nishad Singh Gets No Jail Time, Ordered To Forfeit $11 Billion
Zhao Denies Any Wrongdoing
Zhao has previously denied any wrongdoing related to FTX’s collapse.
In past interviews, he maintained that Binance acted responsibly by selling its FTT tokens after concerns arose.
Notably, Binance had initially considered acquiring FTX during its liquidity crisis. However. It backed out after conducting due diligence and discovering what it described as significant financial irregularities within the company.
This lawsuit marks another chapter in the ongoing legal saga surrounding both companies.
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