Binance Moves to Dismiss FTX's $1.76B Clawback Lawsuit

In a legal rebuttal filed on May 16, crypto exchange Binance asked a Delaware bankruptcy court to dismiss a $1.76 billion clawback lawsuit

Key Notes

* Crypto exchange Binance has asked a Delaware bankruptcy court to dismiss a $1.76 billion clawback lawsuit brought by the FTX estate.

* The motion, filed on May 16, sees Binance arguing that the lawsuit is “legally deficient” and based on speculation.

* The FTX estate is now seeking to recover the funds from a 2021 transaction in which FTX repurchased Binance’s 20% equity stake using a mix of crypto assets.

The world’s leading centralized crypto exchange, Binance, is pressing for a dismissal of a $1.76 billion clawback lawsuit brought by the FTX estate, as reported by May 16 filings with a Delaware bankruptcy court.

In the motion to dismiss, Binance’s lawyers stated that the lawsuit is “legally deficient” and stems from an incomplete perspective, adding that the claims are based on a convicted fraudster’s,, Sam Bankman-Fried (SBF), incomplete and skewed recollections.

The dispute arises from a 2021 transaction in which FTX bought back Binance’s 20% equity stake using a combination of crypto assets, including FTX’s native FTT token, BUSD, and BNB.

The FTX estate asserts that the transaction was funded with misappropriated customer funds and that FTX was already insolvent at the time, claims which Binance vehemently denies.

The motion further highlights that the FTX estate's narrative is a fabrication designed to deflect blame from SBF and shift it onto Binance.

The lawsuit accuses Binance of being unjustly enriched through the $1.76 billion deal and actively participating in FTX’s downfall. It alleges that Binance CEO Changpeng Zhao (CZ) maliciously triggered a fatal run on the exchange with a November 2022 tweet announcing the liquidation of FTI’s FTT holdings.

The move, according to the lawsuit, prompted massive withdrawals and ultimately forced the struggling exchange into bankruptcy.

However, Binance strongly contests this narrative. Its lawyers argue that FTX continued to operate for 16 months after the 2021 transaction, rendering it impossible for the deal to have caused FTX’s collapse.

Moreover, they maintain that CZ’s tweet was not an act of malice but rather a reaction to valid market concerns, specifically a November 2, 2022 CoinDesk article which revealed troubling details about Alameda Research’s balance sheet, leading to the decision to sell the remaining FTT at the time.

The motion from Binance also criticizes the FTX estate's attempt to "shift the blame" for its spectacular collapse onto external actors. It adds that Bankman-Fried, not Binance, was at the helm of what a federal judge has called "one of the most massive corporate frauds in history."

SBF was sentenced to 25 years in prison earlier this year on seven counts of fraud and conspiracy after being found guilty of misusing billions in customer funds and lying to investors, regulators, and the public.

The motion claims that the estate's assertions are a "legal fiction" designed to circumvent the time limit for filing clawback suits. It adds that the FTX estate is effectively pretending that the exchange's collapse wasn't the result of internal rot but an outside conspiracy, a claim they say is unsupported by fact or law.