FTX sues Binance for $1.76B in battle of crypto exchanges founded by convicts

The lawsuit further claims that while FTX was “in freefall, Zhao sent additional false tweets calculated, in part, to prevent FTX from seeking and obtaining alternative financing to cauterize the run on the institution by customers deceived by the tweets. Collectively and individually, these false public statements destroyed value that would have otherwise been recoverable by FTX’s stakeholders.”

Binance calls lawsuit “meritless”

On November 8, 2022, Bankman-Fried and Zhao agreed to a deal in which “Binance would acquire FTX Trading and inject capital sufficient to address FTX’s liquidity issues,” the lawsuit said. But the next day, Binance published tweets saying it was backing out of the deal “as a result of corporate due diligence.”

When Zhao agreed to the deal on November 8, he had “already been made aware of the ‘mishandled’ customer funds during his conversation with Bankman-Fried,” the lawsuit said. “This is contrary to Binance’s representation in the November 9 Tweets that he learned that fact after entering into the Letter of Intent. In addition, Zhao was also aware that the Debtors were insolvent when he entered into the Letter of Intent.”

In the 24 hours between the November 8 agreement and the November 9 tweets, “no new material information was provided to Zhao and Binance in the diligence process that would have revealed new issues” causing Binance to exit the deal, according to the lawsuit.

Binance said it will fight FTX’s lawsuit. “The claims are meritless, and we will vigorously defend ourselves,” a Binance spokesperson said in a statement provided to Ars.

The defendants also included “Does 1-1,000,” people who allegedly received fraudulent transfers in 2021 and “whose true names, identities and capacities are presently unknown to the Plaintiffs.” FTX is seeking recovery of fraudulent transfers from all defendants. FTX also asked the court to award punitive damages and find that Binance and Zhao committed fraud, injurious falsehood, intentional misrepresentation, and unjust enrichment.