FTX, the once-prominent cryptocurrency exchange, has filed a lawsuit against Binance, another major player in the crypto industry, and its former CEO Changpeng Zhao. This legal battle, filed in a Delaware court on Sunday, seeks to recover $1.8 billion. FTX claims that a 2021 transaction, which involved Binance selling its stake in FTX back to the company, was fraudulent. According to FTX, this transaction involved hidden financial issues, potentially worsening FTX’s eventual collapse.

Background on the Dispute

In 2021, Binance decided to sell its 20% ownership stake in FTX and an 18.4% stake in FTX’s U.S.-based entity, West Realm Shires. FTX bought these stakes, and this transaction seemed simple at the time. However, FTX now argues that it could not really afford this buyback, and that it was actually a “fraudulent transfer.” They claim that the transaction was funded by FTX’s Alameda Research division, which was already facing serious financial issues and did not have the money to complete the transaction.

FTX’s lawsuit suggests that its co-founder, Sam Bankman-Fried, who is now serving a 25-year sentence due to fraud charges related to FTX’s collapse, was part of this deal. FTX alleges that the use of Alameda funds for this transaction concealed the company’s fragile financial health, setting the stage for its ultimate failure.

Binance Denies Allegations

In response to these claims, Binance has issued a strong denial, calling FTX’s allegations “baseless.” Binance expressed its intention to defend itself in court, arguing that it conducted the transaction legally and transparently. Binance communicated this in an email statement, saying, “The claims are meritless, and we will vigorously defend ourselves.” This conflict highlights ongoing tensions between these two major players in the crypto market, especially since FTX’s collapse had major effects on the entire crypto industry.

FTX’s Downfall and the Role of Changpeng Zhao’s Tweets

FTX, once valued at $32 billion, faced a sudden downfall as customer trust eroded, leading to mass withdrawals. The lawsuit alleges that Zhao’s actions and comments on social media added fuel to the fire. According to the suit, Zhao made “false, misleading, and fraudulent tweets” that led to more customers pulling out their funds from FTX, worsening its financial struggles.

For instance, one of Zhao’s tweets on November 6th, referred to Binance liquidating its FTX tokens, FTT, as “post-exit risk management.” He mentioned this action as a lesson learned from the collapse of another crypto project, LUNA. This tweet and others allegedly sparked a rush of withdrawals from FTX, putting immense pressure on the company.

The Accusation of Fraudulent Behavior

The lawsuit further claims that the tweets and the way Zhao communicated his decisions influenced public perception of FTX’s financial stability. When Binance decided to liquidate $2.1 billion worth of FTT tokens, Zhao tweeted that this decision was based on “recent revelations,” implying that there were undisclosed issues within FTX. According to FTX, this public statement misled people into fearing that FTX was on shaky ground, prompting them to withdraw funds.

In addition, FTX alleges that Zhao’s actions were not accidental but were meant to damage FTX’s reputation. The lawsuit describes Zhao’s tweets as a planned attempt to destabilize FTX, making its collapse unavoidable.

Legal Battle Marks an Ongoing Rivalry

This lawsuit is just one example of the long-standing competition between FTX and Binance. Both exchanges once dominated the crypto world and collaborated on certain ventures. However, as the two platforms grew, so did the rivalry. Tensions had already been rising between the companies before FTX filed for bankruptcy, but after its sudden collapse, the tension turned into a full legal confrontation.

FTX’s fall from grace was fast and devastating. When it failed to meet withdrawal demands, it filed for bankruptcy. This collapse affected the crypto market, causing other cryptocurrencies to lose value as well. Following the crash, FTX’s founder, Bankman-Fried, faced legal scrutiny and was convicted of fraud. Meanwhile, Binance’s Zhao was accused of not implementing proper anti-money-laundering measures and violating the Bank Secrecy Act. Both Binance and Zhao paid fines, but their legal troubles were not over.

Allegations of False Representation

FTX’s lawsuit also accuses Zhao of making misleading claims in social media posts. In one tweet, Zhao referred to FTT token liquidation as a routine exit process, which he said was done “for risk management” purposes. FTX argues that this tweet implied FTX was facing internal issues and suggested to the public that FTX was unreliable. Additionally, FTX claims that Zhao’s words influenced how the public viewed the situation, worsening FTX’s financial troubles.

The impact of Zhao’s statements spread beyond social media. Public perception of FTX took a hit, and people began withdrawing funds rapidly, creating a domino effect. What started as a few concerned withdrawals soon