Two years after its bankruptcy filing, defunct crypto exchange FTX has filed a lawsuit in the Delaware Bankruptcy Court against Binance Holdings Ltd. and its former CEO Changpeng Zhao, seeking to recover at least $1.76 billion in “fraudulently transferred” funds.

In the lawsuit filed on Sunday, the FTX bankruptcy estate alleges that “at least $1.76 billion worth of cryptocurrency was transferred to Binance in July 2021,” were fraudulently transferred to Binance by FTX founder Sam Bankman-Fried, as part of a deal where FTX repurchased Binance’s equity stake.

In bringing the suit, the FTX estate seeks to void the transfer and recover the funds to repay creditors who suffered significant losses after the crypto exchange’s collapse.

The origins of this legal battle date back to 2019, when Binance acquired a 20% equity stake in FTX, making the two crypto giants allies at the time.

However, tensions soon escalated as FTX rapidly grew into one of Binance’s biggest competitors, as per the filing. By mid-2021, Zhao had decided to exit his stake in FTX.

According to the lawsuit, the repurchase deal was hastily arranged, with Zhao allegedly using his leverage to extract billions from an already struggling FTX.

The transaction involved FTX repurchasing Binance’s stake—around 20% in FTX International and 18.4% in its U.S.-based entity—using a mix of FTT tokens and Binance-branded coins (BNB and BUSD), valued at $1.76 billion at that time.

The lawsuit also argued that Zhao’s now-infamous 2022 tweet, which sparked a wave of customer withdrawals from FTX, was one of a series of “false, misleading, and fraudulent tweets that were maliciously calculated to destroy his rival FTX,” accusing him of “reckless disregard” for FTX’s customers and creditors.

Caroline Ellison, the former CEO of Alameda Research, testified that Alameda did not have the necessary funds for the stake repurchase, with the lawsuit arguing that FTX and Alameda “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021.”

According to Ellison, Alameda was forced to borrow over $1 billion from FTX's customer deposits to cover the transaction. She is now serving a two-year sentence for defrauding FTX and Alameda investors.

FTX co-founder Sam Bankman-Fried allegedly dismissed her concerns about this maneuver, insisting that the deal was crucial to maintaining market confidence.

Following FTX’s downfall, Bankman-Fried stepped down as CEO and was later arrested on charges of fraud, money laundering, and conspiracy. In March 2024, he was sentenced to 25 years in prison after being found guilty of defrauding investors and misusing customer funds.

Binance did not immediately respond to a request for comment from Decrypt.