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FTX Bought Binance’s Stake with Customer Funds
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![The DOJ is accusing Bankman-Fried and other executives of FTX and Alameda of fraud](https://s1.coincarp.com/media_news_cover/20231019/e204b3565c6480508ee19be97705a9735978.png?v=1697709641)
The U.S. Department of Justice (DOJ) has revealed that FTX, the crypto exchange that filed for bankruptcy in 2023, used its customer funds to repurchase the shares that Binance, another crypto exchange, had invested in it in 2019. The DOJ hired an accounting expert to trace the money flows between FTX and its parent company Alameda, which is owned by Sam Bankman-Fried, the founder of FTX and a defendant in the trial.
According to Peter Easton, an accounting professor at the University of Notre Dame, FTX did not keep its customer deposits in a segregated account, but instead used them for various purposes, such as investing in other businesses and properties, making political donations and giving to charities. One of the largest transactions that FTX made with its customer funds was buying back Binance’s stake in the exchange.
Binance had announced in 2019 that it had made a strategic partnership with FTX and acquired an undisclosed amount of shares in the exchange. At that time, FTX was a new entrant in the crypto market, with a daily trading volume of $500 million. By 2022, FTX had grown to become one of the largest crypto exchanges in the world, with a peak daily trading volume of over $50 billion.
In 2022, Binance's CEO Changpeng Zhao posted on social media that FTX had repurchased Binance's stake in the exchange for over $2.1 billion, paid in binance usd (BUSD) stablecoins and FTX's own FTT tokens. Easton testified that more than half of this amount came from FTX's customer funds.
The DOJ is accusing Bankman-Fried and other executives of FTX and Alameda of fraud, money laundering and market manipulation. The trial is expected to last for several weeks.
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