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FTX sues Binance and former chief Zhao for $1.8bn

Estate of collapsed crypto exchange lawsuit alleging 2021 share deal was ‘fraudulent’

Collapsed crypto exchange FTX is suing Binance and its former chief executive Changpeng Zhao for $1.8bn, over an allegedly “fraudulent” share deal.

The dispute relates to a July 2021 deal in which Binance, Zhao and other executives sold their roughly 20 per cent stake in FTX back to the company in exchange for crypto tokens valued at $1.76bn.

The transaction, part of a repurchase deal agreed with founder Sam Bankman-Fried, should not have taken place, according to the lawsuit, which seeks to claw back the tokens for the FTX bankruptcy estate.

In a lawsuit filed in Delaware on Sunday, the administrators of the FTX estate said that the exchange and its sister trading house Alameda Research “may have been insolvent from inception and certainly were balance-sheet insolvent by early 2021”, and so the deal should not have been allowed to proceed.

The transfer of cryptocurrency to Binance and some executives at the company “was a constructive fraudulent transaction”, the lawsuit said.

Bankman-Fried is in prison, having earlier this year been sentenced to 25 years for fraud. Zhao stepped down from Binance in April and spent four months in jail after pleading guilty to failing to establish adequate money laundering controls.

The dispute marks the latest chapter in the tensions between two of the biggest crypto exchanges in the world, as FTX seeks to repay its debts following its dramatic collapse in 2022, which sparked a crash in the price of crypto tokens and pushed other companies into bankruptcy.

“The claims are meritless, and we will vigorously defend ourselves,” Binance said in a statement. Zhao did not immediately respond to a request for comment.

Demand for residential batteries is set to surge

Japan’s drivers have been wary of making the switch to electric vehicles. Its EV market share is about a 10th of China’s, and EVs account for less than 1 per cent of all cars in use. But sluggish EV sales do not necessarily spell bad news for battery makers. The rise of solar power could give them a new source of growth.

Solar power has become the largest source of clean energy in Japan this year. Interest among households has been strong, with more than 3mn residential solar systems installed last year. Demand for a similar number of residential batteries should follow soon. Government measures, including Tokyo requiring all new homes built by large-scale homebuilders from 2025 to have solar panels, are expected to turbocharge sales starting next year.

An even bigger boost is expected from virtual power plants, another area of government focus, that will provide further incentive to install residential batteries. Virtual power plants bring together a large number of interconnected home batteries which are linked through a cloud platform and controlled remotely. That allows operators to sell surplus energy from each of the home batteries during power demand spikes, which generates revenue for homeowners participating in the programme. Starting in fiscal 2026, the trade of this type of electricity stored in residential storage batteries will be facilitated in a dedicated market.

Tesla has a head start here. It started building virtual power plant in Japan with its Powerwall batteries in 2021. It is positioned to benefit from a push into local retail chains, by selling its home battery system through Yamada Denki, Japan’s largest electronics store chain, in a partnership with the chain’s operator Yamada Holdings. Yamada has about 1,000 stores nationwide that already sell residential solar systems. Tesla’s battery will be priced at $13,700, which includes installation costs, making it competitive with local rivals such as Panasonic.

During normal times, household power outages in Japan are extremely rare. But it is not unusual for earthquakes and other disasters to cause widespread outages. The Powerwall home battery, for example, stores 13.5 kilowatt-hours of electricity, which is nearly equivalent to the daily power consumption of an average household. Local companies Toshiba, Itochu and Hitachi are among those betting on energy storage systems for growth.

There is much potential in this relatively overlooked sector: the global battery energy storage market will reach as much as $150bn by 2030, estimates McKinsey. Falling prices of battery cells should help wider adoption of home batteries. As EV sales growth slows this year, energy storage will become increasingly important to the top lines of EV and battery makers.

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Bitcoin prices surged to a record Sunday, hitting $80,000 for the first time

Bernie Moreno was celebrating Tuesday night at La Centre, a banquet center in the Cleveland suburbs, when he got a call from Brian Armstrong, Brad Garlinghouse and a handful of other crypto executives.

The Republican had just defeated three-term Sen. Sherrod Brown, the head of the Senate Banking Committee and one of the largest crypto critics on Capitol Hill. The executives wanted to congratulate Moreno.

The crypto industry emerged as one of the biggest spenders of the election cycle by donating $170 million to a trio of super PACs to elect friendly lawmakers such as Moreno, a former blockchain entrepreneur and car dealer running for election in Ohio.

The effort met with resounding success: 50 of the 58 general-election candidates the super PACs supported won their races, the AP projects. Eight contests were still too close to call as of Sunday evening.

The enthusiasm has been reflected in the market, too. Bitcoin prices surged to a record Sunday, hitting $80,000 for the first time, in a rally that seemed unfathomable in the midst of the 2022 market meltdown that culminated in the collapse of exchange FTX.

Now, the crypto world expects President-elect Donald Trump and the next Congress will deliver what it has long desired: rules that treat it differently from Wall Street.

Trump has vowed to ease the regulatory burden on crypto and create a reserve to hold the nation’s bitcoin supply. Congress will soon be full of lawmakers—young and old—who believe cryptocurrency is a unique asset class that shouldn’t be regulated like stocks and bonds.

Eric Trump, one of the president-elect’s sons, retweeted a meme after the election of a bitcoin flag flying over the White House, a post that captures the hope felt by many in the crypto world.

“We’ve turned a corner,” said Kristin Smith, chief executive of the Blockchain Association, an industry lobbying group. “Our worst days as an industry are behind us, and we are on a path to getting appropriate and lasting policy.”

Several industry executives touted Moreno’s victory on social media and celebrated their role.

“Being anti-crypto is simply bad politics,” Armstrong, chief executive of exchange Coinbase Global, said of Brown’s defeat on X.

“As a pro-innovation, pro-business candidate, I think [Moreno’s] going to be exactly the kind of person we need in the Senate,” said Garlinghouse, CEO of Ripple Labs, who personally donated money to Moreno’s campaign.

Some of the biggest challenges that crypto executives have identified are preventing regulatory oversight from hampering their growth, gaining access to banking, and stabilizing dollar-pegged cryptocurrencies.

It helps that crypto’s biggest critics may soon be gone from Washington. Trump will replace its biggest nemesis: Securities and Exchange Commission Chair Gary Gensler, who argues that crypto firms should have to follow his agency’s investor-protection rules.

The regulator sued the industry’s biggest exchanges—Coinbase, Binance and Kraken—last year, saying they should comply with rules that govern stock exchanges. The spate of litigation galvanized crypto supporters. Republican lawmakers oppose the way Gensler has used his enforcement division to try to rein in big crypto players.

“We are going to make certain that they know what the rules are and how to follow them so that the crypto industry can thrive here,” said Moreno, the incoming Ohio senator. “We have to make sure this technology grows and thrives in America.”

Meanwhile, Brown’s likely successor atop the Senate Banking Committee, Sen. Tim Scott (R., S.C.), wants to draft a new regulatory framework for crypto that eases the requirements for firms engaging in trading and custody.

With Republicans set to take the Senate and retain control of the House, some legislation that previously stalled may stand a better chance of moving forward, even if it is rewritten by the chamber’s new power players.

In May, for example, the House overwhelmingly passed the Financial Innovation and Technology for the 21st Century Act. That bill would have given more responsibility for overseeing crypto to the Commodity Futures Trading Commission, a smaller agency that is seen as more receptive to digital assets. The Senate, controlled by Democrats, didn’t advance the legislation.

“I believe the industry is hopeful that there could be some action taken on those bills during the lame duck,” said Rep. French Hill (R., Ark.). “I hope that’s the case but if it’s not, we’ll be ready to go, and it will be a top priority in the new Congress.”

Hill is chair of the digital assets subcommittee on the House Financial Services Committee and one of the sponsors of the FIT21 bill.

Congress also quashed earlier this year an SEC accounting policy known as SAB 121 that made it difficult for banks to safeguard digital assets. President Biden vetoed Congress’s move, and the SEC later softened the strict stance it took on the guidance.

Even if the crypto industry scores some victories, issues on other fronts may be tougher to crack. The sector has long struggled with access to banking, sometimes using middlemen as solutions, due to banks’ unwillingness to take on clients whose business models revolve around volatile assets. The collapse of two crypto-friendly banks last year further diminished an already small subset of firms willing to bank crypto.

Finding banks to custody their crypto, rather than dollar deposits, has been even harder. And gaining access to the banking system would involve several regulators, including the Federal Reserve, whose leadership isn’t facing wholesale change in 2025.

Another bill died in the Senate Banking Committee in April that would have required stablecoins—a genre of cryptocurrencies pegged to traditional currencies like the dollar—to be backed by reserves. Stablecoins are critical to the industry as a source of liquidity, allowing traders to buy digital currencies on exchanges where fiat currencies aren’t accepted.