The cryptocurrency industry, which has been experiencing a market rebound, is now witnessing a legal storm brewing between two of the biggest names in the space—FTX and Binance. FTX has filed a lawsuit against Binance Holdings Ltd. The lawsuit stems from events dating back to 2021, when a controversial buyback agreement was made between Sam Bankman-Fried (SBF), the co-founder of FTX, Binance, and several Binance officials.
Allegations Relating to the 2021 Buyback Deal
According to the legal filing, FTX alleges that Binance and its executives were involved in the purchase of 20% of FTX’s international platform, as well as 18.4% of its US-based operations. The deal was reportedly valued at approximately $1.76 billion, funded through a combination of FTX’s exchange token FTT and Binance’s own tokens, BNB and BUSD. At the time, these tokens were valued at over $1.7 billion.
However, FTX claims that the deal was financially flawed, pointing out that its sister company, Alameda Research, which was heavily involved in the transaction, may have been insolvent from its inception. The lawsuit further asserts that by early 2021, Alameda Research was already balance-sheet insolvent, which it argues casts a shadow over the validity of the buyback deal.
CZ Accused of Malicious Actions
In addition to these allegations, FTX has also accused Binance’s Changpeng Zhao of playing a malicious role in the downfall of the exchange. The lawsuit highlights a series of “false, misleading, and fraudulent tweets” posted by Zhao, which allegedly had the intention of damaging FTX’s reputation. These posts were made during the critical period before FTX’s collapse in late 2022.
One of the most significant triggers for FTX’s collapse was Binance’s announcement in November 2022 that it intended to sell its remaining FTT tokens, which were valued at $529 million. This decision sent shockwaves through the market, leading to massive withdrawals from the FTX exchange and contributing to its eventual downfall.
Impact on Binance’s Native Token
Amid these ongoing legal battles, Binance’s native cryptocurrency, BNB, has taken a hit. The token dropped 2% in the past 24 hours, reflecting the market’s reaction to the lawsuit and the broader uncertainty surrounding Binance. At the time of writing, BNB was trading at $621.27, despite a hot streak across the wider cryptocurrency market.
The lawsuit is yet another chapter in the tumultuous history between Binance and FTX, and it underscores the complex and often adversarial relationships that can develop between major players in the cryptocurrency industry. As both exchanges continue to grapple with legal and regulatory issues, the outcome of this lawsuit could have far-reaching implications for the industry at large.
Crypto Market Sentiment Remains Volatile
While the cryptocurrency market as a whole has been witnessing positive momentum in recent days, the ongoing legal troubles faced by Binance, and now this high-stakes lawsuit, could introduce volatility. With both exchanges embroiled in court proceedings, stakeholders are left to wonder what the next major development will be in this high-profile legal battle.
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