Binance Countersues FTX for $1.76B, Alleges "Historic Deception" as Main Cause of Collapse
Binance Disputes $1.76 Billion Lawsuit by FTX Estate
The cryptocurrency exchange Binance has filed a motion to dismiss a lawsuit brought by the FTX estate, which seeks to recover funds related to a 2021 share buyback deal. The lawsuit alleges that Binance received billions of dollars in crypto assets improperly funded with customer deposits, suggesting these transfers were fraudulent under U.S. bankruptcy law.
Binance, however, asserts that the lawsuit is "legally deficient" and claims that FTX's collapse was due to internal misconduct and fraud perpetrated by Sam Bankman-Fried, who was convicted of multiple counts of fraud and sentenced to 25 years in prison.
FTX's Allegations and Binance's Defense
The lawsuit, filed by the FTX estate, states that the repurchase of a 20% stake from Binance was financed improperly using customer assets. However, Binance maintains that FTX remained operational for 16 months after the deal, suggesting that the exchange was not on the brink of collapse at the time. Binance argues that the buyback was executed transparently and that there were no red flags at the time.
In addition, the lawsuit suggests that a tweet by Binance's CEO Changpeng Zhao regarding the liquidation of FTT tokens was a trigger for the collapse of FTX. Binance counters this claim, arguing that the tweet came just days after a damning report on Alameda Research's balance sheet and that the company was merely acting on public information to mitigate risk, not to manipulate markets.
Legal Basis and Jurisdiction at Issue
Binance also questions the legal basis of the case, alleging that the court lacks jurisdiction because none of the entities named are U.S.-based or conducted business from the United States. Binance argues that the FTX estate's attempt to apply U.S. state laws in a bankruptcy proceeding relies heavily on hindsight and the word of "a convicted fraudster."
Unfinished Business in FTX Bankruptcy Case
As the FTX estate prepares a second round of creditor repayments, the legal battle unfolds. Over $5 billion is expected to be distributed, with total repayments possibly reaching $16 billion. However, the $1.76 billion claim against Binance remains one of the estate's most high-profile legal maneuvers.
Binance has asked the court to dismiss the suit entirely, with prejudice. FTX has yet to file a formal response. As the Binance-FTX dispute continues, it underscores the unfinished business remaining in the aftermath of the industry's most infamous collapse.
The dispute between Binance and FTX estate centers around a claim that Binance received crypto assets through an improperly funded 2021 share buyback deal, a charge Binance denies. Binance's business and technology operations are questioned in the lawsuit as the court is asked to consider if it has jurisdiction, following Binance's assertion that none of the entities involved are based or operated in the U.S. Despite the ongoing legal maneuvers, the FTX estate is preparing for a second round of creditor repayments, with the Binance claim being one of the most high-profile issues. DeFi, trading, and finance are all aspects that may be influenced by the outcome of this court case.
