FTX and Alameda Seek $1.9 Billion in Binance, Changpeng Zhao (CZ), and Waves Lawsuits

FTX is reportedly suing Binance and its former CEO, Changpeng Zhao (CZ), for a clawback of $1.8 billion. Similarly, Alameda Research, FTX’s trading affiliate, has filed a lawsuit against Aleksandr Ivanov, founder of the blockchain platform Waves.

These developments mark fresh legal moves to reclaim assets tied to the now-bankrupt crypto exchange.

FTX and Alameda Research’s Quest to Recover Assets

According to Bloomberg, FTX filed a lawsuit against Binance Holdings Ltd. and CZ on Sunday. The now-defunct exchange is seeking to recover around $1.8 billion in assets. According to the exchange, these funds were fraudulently transferred by Sam Bankman-Fried (SBF).

Binance, CZ, and other executives reportedly received the funds as part of a July 2021 share repurchase deal with SBF. Bloomberg notes that in that transaction, they sold stakes of about 20% in FTX’s international unit and 18.4% of its US-based entity.

Binance Coin (BNB) is down by almost 2% on this news. It is trading for $619.60 as of this writing.

Meanwhile, Alameda lodged its suit on Sunday. It seeks to recover approximately $90 million allegedly misappropriated by Ivanov and entities connected to Waves through the Vires Finance platform.

According to Alameda’s filing, the lawsuit demands the turnover of assets worth $90 million originally deposited with Vires, a DeFi platform on Waves. These funds were initially sent to Vires in March 2022, when Alameda deposited approximately $80 million in stablecoins USDT and USDC. This amount was reportedly converted into USDN, a Waves-native stablecoin, inflating the total value to around $90 million.

Vires encouraged users to deposit assets through the Waves blockchain to earn rewards. The assets also delivered participation rights in its decentralized autonomous organization (DAO) governance. However, Alameda claims that Ivanov orchestrated covert transactions to inflate the value of WAVES tokens and siphon funds artificially.

“While Ivanov marketed Waves and Vires as opportunities for lenders and other users to make substantial profits, Ivanov secretly orchestrated a series of transactions that artificially inflated the value of WAVES, while at the same time siphoning funds from Vires,” the filing stated.

Despite multiple attempts by the FTX estate to regain these frozen assets, Alameda noted that Ivanov’s communication with the debtors has been minimal. He reportedly participated in only one call in January 2023 and has since ignored any other outreach attempts.

Following Alameda’s lawsuit, the price of Waves (WAVES) is up by a modest 2.29%. The lawsuit minimized or limited its participation in the broader market surge. As of this writing, WAVES is trading for $1.14.

In addition to this lawsuit, other headwinds in WAVES’ path include Binance Exchange delisting the token in June. This added further pressure on the token’s liquidity and market presence.

The Broader FTX Estate Recovery Campaign

This lawsuit is part of a larger effort by the FTX estate to reclaim billions of dollars in assets owed to creditors. In the past week alone, the estate has filed more than 20 lawsuits. It targeted various individuals and organizations to claw back funds. These efforts come as it aims to reimburse stakeholders affected by FTX’s collapse.

Meanwhile, FTX estate’s actions have cast a wide net, including high-profile names and entities. Lawsuits have targeted individuals like Anthony Scaramucci, CEO of SkyBridge Capital. Similarly, the lawsuit implicates companies like the gaming studio behind Storybook Brawl and Deltec Bank chairman Jean Chalopin.

Other recent cases include Alameda’s suit against KuCoin and former FTX CEO Sam Bankman-Fried’s circle of executives. These highlight the estate’s aggressive pursuit of assets reportedly unlawfully diverted.

Taken together, FTX’s campaign represents one of the most extensive clawback attempts in crypto. It brings to light the intricate web of transactions that accompanied the exchange’s rapid rise and collapse.

Each lawsuit filed reflects the estate’s focus on recovering assets for FTX’s extensive list of creditors.  Most of them are institutional investors and individual account holders who suffered significant losses in the exchange’s downfall.

The spotlight on FTX and its related entities has intensified following recent sentencing developments. Caroline Ellison, a former Alameda executive and close associate of FTX founder Sam Bankman-Fried, was recently sentenced for her role in mismanaging FTX’s assets.

The development renewed focus on the executives and management practices within the exchange’s operations. Similarly, the exchange’s CTO is working with the US government to build a fraud detection tool.

For FTX creditors, the aggressive legal pursuits offer at least the promise of accountability and, potentially, the recovery of lost funds.