- Zhao paid $80 million for a 20% stake in FTX in 2019
- In July 2021, FTX paid $2.2 billion to repurchase the shares under Bankman-Fried's leadership
- In a lawsuit filed in Delaware bankruptcy court, FTX and its trading arm, Alameda Research, now claim that the transaction was fraudulent since they were balance-sheet insolvent by early 2021
Changpeng Zhao, founder and former chief executive officer of crypto exchange Binance, will have another day in court just weeks after he was released from prison.
This is because bankrupt crypto exchange FTX has sued Zhao, popularly known as CZ and Binance, to recover shares valued at $1.8 billion that it claims Sam Bankman-Fried, its jailed former chief executive, improperly repurchased in 2021.
According to Protos, Zhao paid $80 million for a 20% stake in FTX in 2019. In July 2021, FTX paid $2.2 billion to repurchase the shares under Bankman-Fried's leadership.
“I think it just makes sense given the role that our businesses are playing in the space. It can also give us more flexibility going forward,” Bankman-Fried told Decrypt at the time, adding that “they did quite well on the investment as well, so I certainly think it’s been a win for them.”
“I'm not involved in the conversations between them and regulators, and so all I can do is speculate, but something I'll say is that we try really hard to be as cooperative as we can with regulators… I think that when you don't do that, and when you sort of appear less flexible or responsive, I think that’s more likely to lead to cases where regulators might feel like they have no choice but to start bringing the hammer,” further explained at the time.
However, in a lawsuit filed in Delaware bankruptcy court, FTX and its trading arm, Alameda Research, now claim that the transaction was fraudulent since they were balance-sheet insolvent by early 2021.
Both FTX Alameda Research “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021,” they alleged in the lawsuit, per Bloomberg.
Based on that, they alleged that the share repurchase deal was made fraudulently.
The bankrupt crypto exchange also accused CZ of posting a number of “false, misleading, and fraudulent tweets” just before FTX’s demise and alleged that the contents of the tweets were “maliciously calculated to destroy his rival.”
Experts say the tweet FTX referred to was barely malicious and wondered why it took the defunct exchange about two before understanding its maliciousness.
Here’s the tweet: “As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete.”
“Binance always encourages collaboration between industry players. Regarding any speculation as to whether this is a move against a competitor, it is not. Our industry is in it’s nascency and every time a project publicly fails it hurts every user and every platform.”
Report: How MrBeast made $23 million from promoting crypto scam schemes
Meanwhile, TheRadar earlier reported that a new report by researchers has revealed how one of the world’s biggest celebrities and the star with the most subscribed Youtube account, MrBest, earned $23 million in crypto.
The report, published by a relatively unknown crypto researcher Loock.io, said MrBest made the money “from a multitude of scams, shady deals, and his network.”
