Binance seeks to dismiss $1.76B FTX lawsuit, blames SBF for collapse

Binance is fighting back against a $1.76 billion lawsuit filed by the FTX estate, arguing the defunct exchange’s collapse stemmed from internal fraud, not Binance’s actions. Filed in Delaware Bankruptcy Court on May 16th, Binance’s motion to dismiss labels the suit “legally deficient,” emphasizing that FTX’s implosion resulted from “one of the most massive corporate frauds in history,” referencing Sam Bankman-Fried’s conviction.

The lawsuit alleges Binance improperly received billions in crypto during a 2021 buyback deal, using customer funds. Binance counters that FTX remained operational for 16 months after this transaction and was not insolvent at the time, asserting there’s “no plausible claim” supporting the insolvency argument. The complaint also accuses Binance CEO Changpeng Zhao (CZ) of triggering the collapse via a November 2022 tweet announcing FTT token liquidation. Binance defends this action, citing the CoinDesk article exposing Alameda Research’s precarious financial state as the basis for CZ’s decision. The company further maintains that CZ’s statement regarding minimizing market impact was genuine.

Binance challenges the court’s jurisdiction, arguing that the named foreign entities are not subject to US jurisdiction. The filing criticizes the lawsuit as relying on conjecture and “hindsight speculation” from a convicted fraudster. Binance seeks dismissal of all claims with prejudice.

Meanwhile, FTX continues its efforts to repay creditors. On May 15th, the FTX Recovery Trust announced a second round of repayments totaling over $5 billion, commencing May 30th via BitGo and Kraken. This distribution targets the second group of eligible creditors under the reorganization plan. Five creditor groups will receive between 54% and 120% of their claims, with a potential total repayment of up to $16 billion, depending on final claim validation. The FTX estate has yet to respond to Binance’s motion to dismiss.