Binance Seeks Dismissal of $1.76 Billion FTX Lawsuit Over Fraud Claims

Binance has taken legal action to dismiss a $1.76 billion lawsuit filed by the FTX estate, asserting that the defunct crypto exchange is attempting to shift blame for its own downfall. The motion, submitted on May 16 in the Delaware Bankruptcy Court, argues that the lawsuit is "legally deficient" and that FTX's collapse was not due to market manipulation or hostile actions, but rather internal misconduct.

Binance's legal team emphasized that FTX's failure was a result of one of the most significant corporate frauds in history, referencing Sam "SBF" Bankman-Fried's conviction on seven counts of fraud and conspiracy. The FTX estate, however, alleges that Binance received billions in crypto during a 2021 buyback deal, which was allegedly funded with customer assets.

Binance refutes this claim, stating that FTX remained operational for 16 months after the share repurchase and that there was no evidence of insolvency at the time. The lawsuit also accuses former Binance CEO Changpeng Zhao of triggering the collapse through a tweet on Nov. 6, 2022, announcing the liquidation of FTT tokens. Binance defended Zhao's actions, stating that the decision was based on publicly known concerns and recent revelations about Alameda Research's balance sheet.

In challenging the court’s jurisdiction, Binance argued that none of the foreign entities named in the lawsuit are incorporated in or maintain their principal place of business in the United States, thus falling outside the court’s reach. The filing also criticizes the plaintiff’s narrative as “a grab bag of state law claims” based 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 not yet filed its response. This legal battle underscores the complex and contentious nature of the FTX collapse, with both parties seeking to establish their respective roles and responsibilities in the aftermath of the fraud. The outcome of this lawsuit could have significant implications for the broader crypto industry, as it may set precedents for how similar cases are handled in the future.