FTX Used Customer Funds to Repurchase Binance Stake, Court Reveals

In a court hearing on Wednesday, it was revealed that the now-bankrupt crypto exchange FTX had used customer funds to buy back the entirety of its stake held by competitor exchange Binance. The disclosure was made as part of the ongoing trial of Sam Bankman-Fried, with the U.S. Department of Justice enlisting the expertise of accounting professor Peter Easton from the University of Notre Dame to trace the flow of billions of dollars between Alameda and FTX.

Binance CEO Changpeng Zhao had previously mentioned in a 2022 post that the company had received over $2.1 billion in Binance USD (BUSD) stablecoins and FTX’s FTT tokens as part of the repurchase.

During the court hearing, Easton confirmed that FTX had indeed used user deposits for various purposes, including the repurchase of Binance's shares. He stated, "Over a billion dollars came from customer funds from FTX exchange."

This revelation raises questions about the use of customer funds and the financial transactions between FTX and Binance. In 2019, Binance had invested an undisclosed amount in FTX as part of a strategic partnership between the two firms. At that time, FTX was processing $500 million daily in trades, significantly less than its peak of over $50 billion.

The ongoing trial and investigations shed light on the intricate financial dealings within the cryptocurrency industry and the potential implications of misusing customer funds.