Binance Files to Dismiss FTX’s $1.76B Clawback, Says Claims Are Flawed

• Binance calls for dismissal of FTX’s $1.76B clawback lawsuit.
• Binance says FTX’s lawsuit lacks a legal and factual basis.
• FTX’s insolvency was blamed on internal fraud, not Binance.

Binance has formally requested the dismissal of a $1.76 billion lawsuit filed by the FTX bankruptcy estate, calling the case legally flawed and an attempt to deflect responsibility from FTX’s internal mismanagement and fraud. Filed in Delaware court, Binance’s motion argues that the now-defunct exchange is wrongly attributing its collapse to Binance and its former CEO, Changpeng “CZ” Zhao, saying the crypto platform is attempting to “shift the blame”.

FTX’s lawsuit, filed in November 2022, seeks to recover funds transferred to Binance in 2021 as part of a stock buyback deal. That transaction involved FTX repurchasing a 20% equity stake from Binance, paid in various tokens including FTT, BNB, and BUSD. The FTX estate claims those assets were funded using misappropriated customer funds, and that FTX was already insolvent at the time.

Binance, however, strongly contests this version of events.

Binance Responds with Sharp Rebuttal

In the motion filed last Friday, Binance described the lawsuit as “legally deficient,” arguing that the plaintiff “ignores the fact that FTX operated for more than a year after the repurchase deal, undermining any claim of prior insolvency.” According to Binance, FTX’s real issue was internal fraud led by its founder, Sam Bankman-Fried, now serving a 25-year prison sentence for orchestrating a multi-billion-dollar fraud.

“Plaintiffs are pretending that FTX did not collapse as the result of one of the most massive corporate frauds in history,” Binance wrote in the court filing.

Another major point of contention in the lawsuit is a tweet by Zhao posted on November 6, 2022. In the tweet, Zhao announced that Binance would liquidate its FTT holdings “due to recent revelations.” FTX has accused Zhao of acting maliciously and triggering a customer panic that led to mass withdrawals.

Binance argues that the tweet was based on public information from a CoinDesk report and was neither misleading nor deceptive. “The complaint contains no facts to suggest that the tweets were false,” Binance emphasized.

Jurisdiction and Legal Reach Questioned

Binance also questioned the U.S. court’s jurisdiction over the case, pointing out that none of the involved Binance entities are based in the United States and that the transactions under dispute did not occur within U.S. borders.

This jurisdiction question would be a significant obstacle for the FTX estate, which has brought several clawback claims as it seeks to regain lost assets in its unraveling. The disposition of this case could establish precedent for the extent to which the FTX recovery trust can go to reclaim billions in lost money from overseas parties.

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