In a recent court hearing, it was revealed that the now-bankrupt cryptocurrency exchange FTX had utilized customer funds to repurchase its entire stake held by competitor exchange Binance. This disclosure was made during a court session on Wednesday.
Binance CEO Changpeng Zhao had previously disclosed in a 2022 statement that his company had received more than $2.1 billion in Binance USD (BUSD) stablecoins and FTX’s FTT tokens as part of this buyback arrangement.
The U.S. Department of Justice (DOJ) has enlisted the services of Peter Easton, an accounting professor from the University of Notre Dame, to trace the movement of billions of dollars between Alameda and FTX as part of the ongoing trial involving Sam Bankman-Fried.
When questioned by the court, Easton confirmed that FTX had indeed used user deposits for various purposes. He testified that these deposits were reinvested into businesses, real estate, used for political contributions, and donated to charitable causes.
Most notably, these user deposits were employed to repurchase Binance’s shares in FTX, with Easton revealing that over a billion dollars had been sourced from customer funds on the FTX exchange.
It’s worth noting that in 2019, Binance had made an undisclosed investment in FTX as part of a strategic partnership between the two companies. At that time, FTX was a relatively small platform processing $500 million in daily trades, a stark contrast to its peak trading volume of over $50 billion.
Over the years, the relationship between these two exchanges had deteriorated, and their disagreements even spilled over into social media platforms.