rewrite this title Binance Seeks Dismissal of FTX’s $1.76B Clawback Suit, Calling It ‘Legally Deficient’ – Decrypt

Binance has asked a Delaware bankruptcy judge to toss out a $1.76 billion lawsuit brought by the FTX estate, saying that the defunct crypto platform is attempting to “shift the blame” for its collapse away from founder Sam Bankman-Fried and onto his competitors.

Binance Holdings Ltd. said the complaint is “legally deficient” and cannot plausibly link Binance or its former CEO Changpeng Zhao to FTX’s downfall, in a motion to dismiss filed last Friday.

“Plaintiffs are pretending that FTX did not collapse as the result of one of the most massive corporate frauds in history,” the filing said, noting that former CEO Sam Bankman-Fried is now serving a 25-year prison sentence for defrauding customers, investors, and lenders.

The lawsuit, filed last November, seeks to claw back roughly $1.76 billion worth of crypto that FTX transferred to Binance in July 2021 as part of a share repurchase agreement. 

FTX had previously sold Binance a 20% equity stake in 2019, which it later bought back using a mix of BNB, BUSD, and FTT tokens.

The FTX estate claims the exchange was insolvent at the time of the 2021 deal, and that misappropriated customer funds secretly financed the repurchase. 

But Binance argues in the motion that FTX “remained a going concern for 16 months” afterward, making any claim of prior insolvency implausible.

The lawsuit also alleged that Zhao “maliciously” used Twitter to trigger a wave of customer withdrawals, posting on November 6, 2022, that Binance would liquidate its FTT holdings “due to recent revelations.” 

“The November 2022 tweets were posted in the days following a bombshell report by CoinDesk that blew the lid off of FTX’s facade, and the complaint contains no facts to suggest that the tweets were false,” Binance wrote, defending the tweets.

The exchange also said the case should be dismissed for lack of personal jurisdiction, saying that none of the corporate defendants are based in the U.S. and did not directly engage in the transfers.

The FTX recovery trust has filed numerous clawback suits to recover assets following the platform’s collapse, which triggered one of the largest crypto bankruptcies in history and left billions in customer funds missing.

Decrypt will update the story if Binance responds to a request for comment.

Edited by Sebastian Sinclair