Binance, a leading cryptocurrency exchange, has lodged a motion to have a $1.76 billion lawsuit brought against it by the FTX estate dismissed. The suit, which was filed on May 16 in the Delaware Bankruptcy Court, alleges that Binance is responsible for the failure of the now-defunct FTX exchange. Binance, however, pins the blame on internal misconduct within FTX.
The legal counsel for Binance has labeled the lawsuit as “legally deficient,” insisting that the downfall of FTX was not the result of market manipulation or any hostile actions, but was due to internal mismanagement. “Plaintiffs are attempting to divert attention away from the fact that FTX’s collapse was due to one of the largest corporate scams in history,” the motion reads, referring to Sam “SBF” Bankman-Fried’s conviction on seven counts of fraud and conspiracy.
The FTX estate further claims that Binance received billions in cryptocurrency during a buyback deal in 2021, which was funded improperly with customer assets. Rejecting this allegation, Binance argues that FTX “remained a viable entity for 16 months” after the share buyback, and contends there is “no plausible claim” that the exchange was insolvent at that point.
The lawsuit also accuses former Binance CEO Changpeng Zhao of causing a market crash by tweeting about the liquidation of FTT tokens on November 6, 2022. Binance retorts that Zhao’s tweet was grounded on publicly available information, citing a November 2, 2022 CoinDesk article that revealed Alameda Research’s financial status.
In a further defence, Binance refutes any suggestion that it had no intention of minimising market impact. The exchange also challenges the court’s jurisdiction, stating that none of the foreign entities named in the suit “are incorporated in or have their principal place of business in the United States” and are, therefore, outside the court’s jurisdiction.
The motion also criticizes the plaintiff’s narrative as “a hodgepodge of state law claims” built on “pure conjecture—much of it sourced from a convicted fraudster’s hindsight speculation.” Binance has requested the court to dismiss all claims with prejudice. The FTX estate has yet to file its response.
In related news, the FTX Recovery Trust announced on May 15 that it will begin its second round of repayments to creditors starting May 30. Over $5 billion will be disbursed through BitGo and Kraken to the second group of eligible parties under the exchange’s reorganization plan. Depending on the final number of valid claims, FTX may repay up to $16 billion in total.
