- FTX filed a series of 11th-hour lawsuits
- The suits are an attempt to claw back funds to pay creditors of the collapsed exchange.
Bankrupt crypto exchange FTX and its sister hedge fund Alameda Research sued their former arch rival, exchange giant Binance, for $1.8 billion.
The lawsuit, filed on Sunday, is the biggest of at least 28 lawsuits launched by the FTX estate in Delaware over the past week in an attempt to claw back money to pay off customers.
Defendants of these suits include Binance and its founder and erstwhile CEO Changpeng Zhao, Skybridge Capital Founder Anthony Scaramucci, Compound DAO exploiter Humpy the Whale, and others.
Altogether, FTX is looking to get back at least $284 million, besides the almost $2 billion from Binance, according to back-of-the-envelope calculations done by DL News.
That figure includes what the lawsuits ask for in relief, but it doesn’t account for further damages the court may award FTX.
Once a $32 billion behemoth, FTX foundered in 2022. In the fallout, founder Sam Bankman-Fried was sentenced to 25 years in prison for fraud.
The FTX estate has tried to return funds to FTX’s customers. It had until Monday to file suits against parties it wants to get money from — which accounts for the flurry of filings.
Here are some of the clawback lawsuits.
Binance
FTX’s complaint against Binance stems from a 2021 deal where Binance sold its 20% stake in FTX’s US entity back to the company for $1.8 billion worth of crypto tokens.
FTX was almost certainly insolvent from its inception, the lawsuit said, and Bankman-Fried knew that.
Therefore, the deal was essentially fraud and should not have been allowed to go ahead, it said.
Anthony Scaramucci
In mid-2022, the crypto winter was biting.
Skybridge Capital — the hedge fund founded by erstwhile White House communications director Scaramucci — had plunged from $9 billion to $2.2 billion.
Scaramucci was casting about for a bailout, says a lawsuit filed against him and SkyBridge.
“Scaramucci correctly identified Bankman-Fried as someone willing to spend money while asking very few questions,” the lawsuit said. In return, Bankman-Fried saw Scaramucci as providing access to his high-powered roster of friends in business and politics.
FTX invested about $67 million in SkyBridge projects as part of “an influence-buying campaign” — money FTX now wants back.
Aleksandr ‘Sasha’ Ivanov
FTX is also suing Waves blockchain founder Aleksandr “Sasha” Ivanov for $90 million.
During its short life, Alameda traded crypto on exchanges and decentralised finance protocols — including Waves.
While Ivanov marketed Waves and associated lending protocol, Vires, as ways investors could make big bucks, he was syphoning user funds from Vires, the FTX lawsuit says.
As the fraud was uncovered, Waves lost 95% of its value and Vires users were saddled with $530 million in losses. Ivanov blamed Alameda, saying it manipulated the Waves price.
Humpy the Whale
A run of fraud and market manipulation schemes by Nawaaz Mohammad Meerun — also known as Humpy the Whale — cost Alameda $1 billion in 2021 and 2022, another lawsuit filed by FTX says.
Mauritian Meerun inflated the value of illiquid tokens and then exploited weaknesses in FTX’s rules to take out loans Alameda had to cover, the lawsuit says.
Meerun is linked to money laundering operations and Ponzi schemes, and has ties to organised crime and Islamic extremists, it alleges.
He has continued to engage in widespread market manipulation and crypto fraud — most recently, a “governance attack” on Compound Finance.
Crypto exchanges
The FTX estate is suing a number of crypto exchanges including Crypto.com’s owner Foris Dax, Huobi and MEXC Global.
The lawsuits allege that Alameda traded — sometimes under aliases — on these exchanges. The exchanges are withholding those assets from the FTX estate, the lawsuits say.
In late October, FTX settled with Bybit in a deal that allows FTX to access about $228 million of the exchange’s assets.
Effective altruism charities
FTX is also suing a series of non-profit organisations related to Effective Altruism — a philosophical movement with which Bankman-Fried was closely associated.
FTX donated Alameda funds that were mixed in with customer deposits to these charities. Few of these funds went to the needy, the lawsuits say, but rather benefited effective altruist insiders.
Plus, these donations “burnished Bankman-Fried’s public image as a do-gooder even as he orchestrated one of the largest fraudulent schemes in US history,” the suits say.
Campaign financing
FTX is also suing political and advocacy organisations, including the Mark Zuckerberg-founded FWD.US.
The suits allege that these organisations received donations from FTX executives made on behalf of Bankman-Fried. These so-called “straw donations,” which conceal the true origin of the funds, are illegal.
Former FTX exec Ryan Salame recently began a seven-and-a-half-year prison sentence for his role in this scheme.
Reach out to the author at joanna@dlnews.com