Binance seeks to dismiss a $1.76B FTX lawsuit, arguing it wrongly blames the exchange and former CEO Changpeng Zhao for FTX’s internal, fraud-related collapse.
Binance has accused the now-defunct cryptocurrency exchange of attempting to shift responsibility for its failure and filed a motion to dismiss a $1.76 billion lawsuit launched by the FTX estate.
Binance’s legal team referred to the May 16 filing in the Delaware Bankruptcy Court as “legally deficient,” claiming that internal misbehavior, rather than hostile action or market manipulation, was the cause of FTX’s demise.
Citing Sam “SBF” Bankman-Fried’s conviction on seven counts of fraud and conspiracy, the brief added, “Plaintiffs are pretending that FTX did not collapse as the result of one of the most massive corporate frauds in history.”
According to FTX’s estate, Binance wrongfully used client assets to support a 2021 buyback transaction that resulted in billions of dollars in cryptocurrency.
Binance disputes this assertion, claiming there was “no plausible claim” that the exchange was insolvent at the time and that “FTX remained a going concern for 16 months” following the share repurchase.
The FTT meltdown and Zhao’s tweet
Changpeng Zhao was also charged with inciting a collapse by tweeting on November 6, 2022, about the FTT token liquidation.
Binance responded by asserting that Zhao’s post was based on well-known issues. In actuality, “recent revelations”—specifically, the CoinDesk story published on November 2, 2022, revealing Alameda Research’s balance sheet—caused Binance to decide to sell out the remaining FTT.
The business also defended Zhao’s statement that Binance would try to impact the market as little as possible. “The Complaint contains no such facts” to demonstrate that Binance had no plans to act.
No foreign companies listed “are incorporated in or maintain their principal place of business in the United States,” according to Binance, which contested the court’s jurisdiction.
The plaintiff’s story is also criticized in the brief as being “a grab bag of state law claims” and based primarily on “pure conjecture,” with a lot of it coming from the retrospective speculation of a convicted fraudster.
Binance has requested that all claims be dismissed with prejudice by the court. The response from the FTX estate has not yet been submitted.
$5 billion will be distributed by FTX in the second tranche of creditor repayments.
FTX will begin its second round of debt repayments to creditors more than two years after filing for bankruptcy.
Targeting participants in the second eligible group under the exchange’s restructuring plan, the FTX Recovery Trust said in a notification dated May 15 that more than $5 billion will be disbursed beginning May 30 through BitGo and Kraken.
Five creditor groups classified as “convenience classes” are to receive 54% and 120% of claims, respectively, according to the plan. FTX could pay back up to $16 billion in total, contingent on the ultimate amount of legitimate claims.
