- FTX is accused of using customer deposits to repurchase Binance stake.
- An accounting professor hired by the US Department of Justice reveals over a billion dollars came from customer funds for the share buyback.
- FTX’s proposed recovery plan offers hope, aiming for a 90% asset return to customers affected by the exchange’s bankruptcy.
In a shocking revelation, the ongoing legal proceedings surrounding the defunct cryptocurrency exchange FTX have unveiled that the exchange allegedly used customer funds to buy back its stake held by Binance.
This development has raised serious concerns about the handling of customer deposits within the crypto industry.
Customer funds diverted for Binance share repurchase
During a court hearing, it was disclosed that FTX, a crypto exchange that filed for bankruptcy in November 2022, employed customer deposits to repurchase its shares from competitor Binance. Binance CEO Changpeng Zhao in November 2022 acknowledged that his company had received over $2.1 billion in Binance USD (BUSD) stablecoins and FTX’s FTT tokens as part of this transaction.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
The revelation has led to intense scrutiny and legal action, with an accounting professor from the University of Notre Dame, Peter Easton, being hired by the US Department of Justice to trace the flow of billions of dollars between Alameda, the parent company of FTX, and the exchange. Professor Easton confirmed that user deposits were redirected for various purposes, including reinvestment in businesses and real estate, political contributions, and charitable donations.
The most significant revelation, however, was that over a billion dollars for the share repurchase had come directly from customer funds held by FTX. This has raised concerns about the exchange’s financial practices and the protection of customer assets.
FTX’s recovery plan
Amidst the controversy surrounding the use of customer funds, FTX’s estate has proposed a settlement plan to address the loss of customer assets when the exchange declared bankruptcy in November 2022. The plan aims to provide a 90% return of assets to affected customers, potentially offering relief to those who suffered losses during the exchange’s collapse.
This development signifies a potential path forward for affected customers and highlights the ongoing efforts to resolve the fallout from FTX’s bankruptcy. The legal and regulatory proceedings will be pivotal in determining the fate of this proposed recovery plan and the ultimate distribution of customer assets.
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- Source: https://coinjournal.net/news/ftx-trial-ftx-used-billions-in-customer-funds-for-binance-stake-buyback/
