Binance takes a significant legal action to dismiss a $1.76 billion lawsuit filed by the FTX estate. On May 16, the company submitted its motion to the Delaware Bankruptcy Court, arguing that the FTX lawsuit misrepresents the root cause of the failed exchange's collapse. Binance contends that FTX's downfall was due to internal fraud rather than any external actions or market manipulation.
Binance's legal team described the lawsuit as "legally deficient" and highlighted the conviction of Sam Bankman-Fried (SBF) on seven counts of fraud and conspiracy. In their filing, Binance stated, "Plaintiffs are pretending that FTX did not collapse due to one of the most massive corporate frauds in history." The court documents confirm that Binance was not responsible for FTX's collapse; instead, it was internal issues within FTX that led to the company's downfall.
The FTX estate accused Binance and former CEO Changpeng Zhao (CZ) of playing a role in destabilizing FTX through a public announcement on November 6, 2022. That day, Zhao tweeted that Binance planned to liquidate its FTT holdings. This lawsuit alleges that this caused FTT’s price to drop quickly, which led to FTX’s liquidity difficulties.
Binance explained that Zhao liquidated their FTT holdings based on news reports and new findings so as not to intentionally cause problems for FTX. The company pointed to a November 2, 2022, report highlighting issues in Alameda Research’s balance sheet. The exchange stated that its steps were taken in accordance with taking prudent risks based on the new information.
In addition, the FTX estate claims Binance received billions in crypto through a buyback in 2021, alleging these funds came from the unauthorized use of customer money. Binance noted that FTX operated as usual for over a year after the money transfer. According to the filing, there was no proof that FTX could not pay debts or that the deal with FRR was improper at the time.
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There is also a dispute about the court’s jurisdiction over the case. According to Binance, each foreign business named in the lawsuit has neither its incorporation nor its primary location in the United States. Binance argues that the Delaware court does not have the power to preside over these cases.
Binance further described the FTX complaint as “a grab bag of state law claims” that rely on speculation and post-collapse hindsight rather than substantiated evidence. The company has asked the court to dismiss all claims with prejudice.
The FTX estate has not yet filed a response to Binance’s motion. FTX plans to pay back more than $5 billion to creditors as it operates through bankruptcy, having filed nearly two years before. The result of this process may establish new legal standards in the cryptocurrency industry.