Defunct cryptocurrency exchange FTX is suing former rival Binance for “fraudulent” stake buyback from 2021. FTX is demanding approximately $1.8 billion in reparation, according to a lawsuit filed at a Delaware court on Sunday.
The subject of the lawsuit is a transaction that saw Binance and its former CEO, Changpeng Zhao, sell a 20% stake in FTX back to the company. The deal was conducted by FTX’s sister company, Alameda Research, through a combination of assets, including digital tokens and stablecoin.
FTX now claims that Alameda was unable to fund the purchase of the stake at the time because it was already “insolvent.” It deemed the deal as “fraudulent” and is looking to recoup the assets transferred to Binance as well as “compensatory and punitive damages to be determined at trial.”
Binance, on the other hand, rejected any wrongdoings through a short statement issued on Sunday.
“The claims are meritless, and we will vigorously defend ourselves,” said Binance.
At its peak in early 2022, FTX was the world’s third-largest cryptocurrency exchange, with a valuation of $32 billion. However, it was soon discovered that the company, namely its CEO Sam Bankman-Fried, mishandled funds and used them for personal benefit. Users rushed to withdraw their holdings, causing FTX to collapse and file for bankruptcy in November 2022.