Binance, the world’s largest cryptocurrency exchange, is asking a judge to dismiss a $1.76 billion lawsuit filed by the FTX estate.
The company has strongly denied any involvement in the collapse of FTX, saying the legal case is based on false claims and an attempt to shift blame away from the real cause of the disaster—fraud committed by FTX founder Sam Bankman-Fried.
On 16 May, Binance’s legal team filed a motion in the Delaware Bankruptcy Court, where FTX’s bankruptcy case is being handled. The filing describes the lawsuit as “legally deficient” and says FTX’s current leadership is trying to rewrite the events that led to the company’s downfall.
The motion claims that there is no real evidence that Binance or its former CEO, Changpeng Zhao, played any role in causing FTX to collapse.
“FTX didn’t collapse because of Binance”, the filing reads. “It failed because of massive fraud by Sam Bankman-Fried.”
The lawsuit from FTX’s estate focuses on a transaction that took place in July 2021. At the time, FTX agreed to repurchase shares it had previously sold to Binance in 2019.
The value of the buyback was around $1.76 billion, paid in various cryptocurrencies including Binance Coin ($BNB), Binance USD ($BUSD), and FTX Token ($FTT)—the token created by FTX itself.
FTX now claims that this transaction was funded with customer money and that it contributed to the company’s financial problems.
Binance disagrees. It argues that the deal was completely legal and carried out through normal business channels. The exchange says that at the time of the transaction, FTX was operating normally and showed no signs of being insolvent.
“The complaint does not offer any plausible evidence that FTX was unable to meet its financial obligations at the time of the share repurchase”, Binance’s legal team wrote.
They also pointed out that FTX continued to run its business for over 16 months after the transaction, which, they argue, weakens the idea that the deal somehow caused the collapse.
The role of Zhao’s tweet and Bankman-Fried’s criminal case
The FTX estate has also claimed that a tweet from former Binance CEO, Changpeng Zhao, contributed to the collapse.
On 6 November 2022, Zhao announced on the social media platform X that Binance would be selling off its remaining FTT tokens due to “recent revelations”.
The FTX estate says this message caused panic among investors and led to a surge in withdrawals from the FTX platform—effectively starting a run on the exchange.
In response, Binance said that Zhao’s decision to sell FTT tokens was based on information already available to the public.
The company referred to a CoinDesk report published on 2 November 2022, which exposed major problems with the balance sheet of Alameda Research, a trading firm closely linked to FTX. Binance’s lawyers say Zhao was acting on that report and not trying to harm FTX.
“Binance’s decision to liquidate its remaining FTT was, in fact, due to recent revelations — in particular, the Nov. 2, 2022, CoinDesk article”, the filing explained.
The exchange also addressed Zhao’s statement at the time, in which he said Binance would try to “minimise market impact” while selling the tokens.
The FTX lawsuit suggests Zhao had no real intention of following through on that promise. Binance denies this, saying there are no facts in the complaint to support that accusation. Binance’s lawyers also argue that Zhao had no personal role in the 2021 share repurchase deal.
While he was CEO of the company at the time, they say he was not directly involved in managing the transaction.
Moreover, the company is based outside the United States, and none of the named Binance entities are incorporated or mainly operate in the US.
Because of this, Binance is challenging the court’s authority to hear the case at all. “None of the foreign entities maintain their principal place of business in the United States”, the filing notes. This means, according to Binance, that the Delaware court may not have legal jurisdiction over the case.
Binance is asking the court to dismiss all claims permanently, “with prejudice.” That would prevent FTX from filing the same lawsuit again in the future.
Wider legal battle and FTX’s repayment efforts
The dispute between Binance and the FTX estate is just one part of a much larger legal and financial mess that followed FTX’s collapse in November 2022. Once valued at tens of billions of dollars, FTX went bankrupt after serious problems with its finances were exposed.
Sam Bankman-Fried, who had been seen as a rising star in the crypto industry, was found guilty of fraud and conspiracy in a US federal court and is now serving a 25-year prison sentence. FTX’s estate is now trying to recover as much money as possible for the company’s creditors.
More than $11 billion is still owed, and legal action is being taken against a range of former executives, partners, and investors who may have received funds from FTX before it went under.
The case against Binance is part of this broader effort. FTX’s current administrators believe that the 2021 share buyback deal involved misused customer funds and that Binance should return the $1.76 billion it received.
Binance, on the other hand, argues that the entire complaint is based on speculation and hindsight, especially given that much of the argument relies on statements from Bankman-Fried, who has since been convicted of serious financial crimes.
“The complaint is a grab bag of state law claims based on pure conjecture — much of it sourced from a convicted fraudster’s hindsight speculation”, Binance said in the court filing.
As the court reviews the motion to dismiss, the FTX estate has not yet filed a response. It remains to be seen whether the case will move forward or if the court will agree with Binance’s request to throw it out.
Meanwhile, FTX is moving ahead with plans to repay creditors. In a notice released on 15 May, the FTX Recovery Trust confirmed that a second round of repayments will begin on 30 May. The payments will be distributed through crypto platforms BitGo and Kraken.
According to FTX’s reorganisation plan, creditors in the so-called “convenience classes” could receive between 54% and 120% of the value of their approved claims.
Depending on the total number of verified claims, the estate could repay as much as $16 billion in total. Despite these efforts, the legal battle with Binance shows that the road to full recovery remains complicated.
For now, Binance continues to deny any wrongdoing, stressing that the true cause of the FTX collapse was the “massive fraud” committed by its former CEO.
