Binance has filed a motion to dismiss a $1.76 billion lawsuit brought by the FTX estate, accusing the defunct crypto exchange of trying to deflect blame for its own failure.
Filed on May 16 in the Delaware Bankruptcy Court, Binance’s legal team called the suit “legally deficient,” stating that FTX’s collapse was not triggered by market manipulation or hostile action but by internal misconduct.
“Plaintiffs are pretending that FTX did not collapse as the result of one of the most massive corporate frauds in history,” the filing said, pointing to Sam “SBF” Bankman-Fried’s conviction on seven counts of fraud and conspiracy.
FTX’s estate alleges that Binance received billions in crypto during a 2021 buyback deal, funded improperly with customer assets.
Binance rejects this claim, stating that “FTX remained a going concern for 16 months” after the share repurchase and that there was “no plausible claim” the exchange was insolvent at the time.
Related: Binance wants arbitration for all members of securities class suit
Zhao’s tweet and FTT crash
The lawsuit also accuses former Binance CEO Changpeng Zhao of triggering a collapse through a tweet on Nov. 6, 2022 announcing the liquidation of FTT tokens.
In response, Binance argued that Zhao’s tweet was based on publicly known concerns. “Binance’s decision to liquidate its remaining FTT was, in fact, ‘due to recent revelations ’— in particular, the Nov. 2, 2022, CoinDesk article” that exposed Alameda Research’s balance sheet.
The company further defended Zhao’s comment that Binance would aim to minimize market impact. “The Complaint contains no such facts” to prove Binance had no intention of following through.
In challenging the court’s jurisdiction, Binance said none of the foreign entities named “are incorporated in or maintain their principal place of business in the United States,” and thus fall 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 asked the court to dismiss all claims with prejudice. The FTX estate has not yet filed its response.
Related: FTX EU creditors can now withdraw money from Backpack exchange
FTX to disburse $5 billion in second round of creditor repayments
FTX is set to begin its second round of repayments to creditors more than two years after filing for bankruptcy.
In a May 15 notice, the FTX Recovery Trust announced that over $5 billion will be distributed starting May 30 through BitGo and Kraken, targeting parties in the second eligible group under the exchange’s reorganization plan.
According to the plan, five creditor groups categorized as “convenience classes” are expected to receive between 54% and 120% of their claims. In total, FTX may repay up to $16 billion, depending on the final number of valid claims.
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