FTX Used Billions in Customer Funds to Buy Back Binance Stake

Bankrupt crypto exchange FTX used customer funds to buy back the entirety of the firm’s stake held with competitor exchange Binance, a court hearing on Wednesday revealed.

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

Peter Easton, an accounting professor at the University of Notre Dame, has been hired by the U.S. Department of Justice (DOJ) to trace the billions of dollars between Alameda and FTX as part of the ongoing Sam Bankman-Fried trial.

“Oh, yes,” Easton said when asked by the court whether FTX ever spent user deposits. The professor testified these user deposits were reinvested into businesses and real estate, used to make political contributions and donated to charity, as reported.

Read more: ‘Oh, Yes’: Accounting Prof Says Sam Bankman-Fried’s FTX Definitely Mishandled Customers' Money

These deposits were used to buy back Binance’s shares in FTX. “Over a billion dollars came from customer funds from FTX exchange,” Easton testified on Wednesday.

In 2019, Binance invested an undisclosed amount of money in FTX as part of a strategic partnership between the two firms. The then-infant FTX processed $500 million daily in trades, a far cry from the over $50 billion at its peak.

Relations between the two gradually soured over the years, even spilling over to social media.