Binance has filed a motion to dismiss the $1.76 billion lawsuit brought by the FTX bankruptcy estate, stating that the claims lack both legal and factual grounds. The filing, submitted last Friday in Delaware, centers on FTX’s 2021 share repurchase deal and attempts to assign blame for its collapse on Binance and its former CEO, Changpeng “CZ” Zhao.
FTX Seeks to Recover 2021 Share Repurchase Assets
FTX’s original lawsuits against Binance came after the two companies agreed on a deal in July 2021 where FTX bought 20% of Binance’s shares. To make the payment, Binance used digital assets like BNB, BUSD and FTT. The estate of FTX claims that the transaction misused clients’ money and, at that point, the platform could not meet its liabilities.
However, Binance’s court filing challenges that view. The exchange stated that FTX continued operating for 16 months after the buyback, which it said undercuts the claim. Binance also argued that the clawback attempt ignores the real cause of FTX’s downfall, which the firm traced to internal fraud.
FTX’s Collapse Linked to Fraud, Binance Says
In its motion, Binance referred to the conviction of FTX founder Sam Bankman-Fried. He is currently serving a 25-year sentence for setting up one of the largest corporate frauds in U.S. history. Binance argued that FTX’s leadership had already misused funds well before its own involvement, asserting that the exchange had no role in the events that led to FTX’s collapse.
In its lawsuit, the company also points to Zhao’s tweet on November 6 that indicated Binance would sell its FTT holdings back in November. According to FTX, the tweet made many customers rushed to withdraw which led to its downfall.
In reply, Binance stated that the comments from Zhao were based on readily available information. The motion asserted that the complaint includes no evidence that the tweet was false or deceptive. Binance emphasized that market reaction followed a broader disclosure of FTX’s financial state.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ 🔶 BNB (@cz_binance) November 6, 2022
Another key point in Binance’s motion involves jurisdiction. The company stated that none of the Binance entities involved are based in the United States. It also argued that the share repurchase deal did not take place within U.S. territory. It was stated by legal professionals that the court must decide the jurisdiction issue prior to reviewing the main case. A complete dismissal halts any advancement in the case, whereas a partial denial allows either discovery or a chance for settlement talks.
