As a seasoned analyst with years of experience in the volatile world of cryptocurrency, I find myself constantly on the lookout for signs of manipulation, fraud, and market manipulation within this rapidly evolving landscape. The $1.8 billion lawsuit filed by FTX against Binance and its former CEO, Changpeng Zhao, has certainly caught my attention.
The estate of bankrupt crypto exchange FTX filed a lawsuit against Binance and its former CEO, Changpeng Zhao, for alleged fraudulent transfers and starting a campaign to “destroy” its competitor. The $1.8 billion legal action follows another 23 lawsuits filed last Friday to claw back part of the ill-spent funds.
Binance Hit With $1.8 Billion Lawsuit
On a Sunday, FTX initiated a legal action at the U.S. Bankruptcy Court in the District of Delaware, targeting global cryptocurrency exchange Binance, its previous CEO Changpeng Zhao, and aiming to recover approximately $1.76 billion worth of funds that belong to creditors.
As an analyst, I’ve uncovered evidence from court documents suggesting that the bankruptcy estate contends my previous role as FTX’s co-founder and CEO, Sam Bankman-Fried, orchestrated a questionable stake repurchase deal via our affiliated company, Alameda Research. The estate claims this transaction may have been fraudulent.
From 2019 to 2020, Binance obtained a 20% share in FTX International and an 18.4% share in its U.S. division, making it the exchange’s second biggest shareholder. But in July 2021, SBF, or Sam Bankman-Fried, bought back the shares for $1.76 billion using a combination of FTX’s own token (FTT), Binance Coin (BNB), and Binance USD (BUSD) from the bankrupt exchange.
The legal team representing FTX suggests that both the exchange and its related entity might have been financially unstable since their launch, and definitely showed signs of bankruptcy on their financial statements by early 2021. As a result, any buyback agreement executed during this period could potentially be considered fraudulent.
Furthermore, it’s worth noting that Caroline Ellison, the previous CEO of Alameda Research who is now imprisoned, previously stated under oath that the repurchase agreement was carried out using customer deposits. Ellison, a crucial witness in SBF’s trial, disclosed that Bankman-Fried executed this deal to hide Alameda’s financial instability.
CZ And Binance’s Alleged Campaign Against FTX
The lawsuit accused Binance’s co-founder and former CEO, Changpeng Zhao, of orchestrating a “campaign to destroy FTX.” The document alleges that Zhao posted a series of “false, misleading, and fraudulent tweets” to turn customers against the now-bankrupt exchange.
Moreover, the property asserts that CZ (Changpeng Zhao) and Binance took part in “deliberately planned” actions, involving a “prolonged, organized smear campaign” targeting FTX throughout 2022.
According to the document, tweets from Binance’s former CEO on November 6, 2022 intensified the issue regarding withdrawals from the exchange. Zhao stated that Binance intended to sell all its FTT tokens, valued at $529 million at that time, in response to recent disclosures. This announcement led to an increase in withdrawal requests.
In my analysis, the lawsuit contends that Binance’s public sale of FTT tokens was not strategically executed to mitigate market influence. Instead, it alleges that Zhao disclosed his selling intentions primarily to maximize public relations impact and boost Binance’s market dominance.
Nevertheless, a Binance representative stated to Bloomberg that these allegations are groundless, and the platform intends to strongly contest them.
According to Bitcoinist‘s report, yesterday’s legal action is a continuation of FTX’s 23 lawsuits against various entities. These lawsuits are aimed at retrieving funds misused by SBF before the scheduled payout to creditors, which is anticipated to begin towards the end of 2024.
Among the ongoing legal disputes involving FTX estate are Singapore’s digital currency exchange Crypto.com, the immigration and justice advocacy organization FWD.US that was co-founded by Mark Zuckerberg, and SkyBridge Capital, the hedge fund managed by Anthony Scaramucci.
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2024-11-12 08:29