Binance recently filed a motion in the U.S. Delaware Bankruptcy Court seeking to dismiss the $1.76 billion clawback lawsuit brought by the FTX estate. The exchange labeled the case “legally deficient,” arguing that it lacks both factual basis and jurisdictional grounds.
The $1.76B Clawback Lawsuit
FTX filed its clawback lawsuit against Binance and former CEO Changpeng Zhao in November 2024. It sought approximately $1.76 billion in funds allegedly transferred fraudulently during a July 2021 share repurchase deal. FTX’s estate alleged that the repurchase transaction was funded with customer assets and that the defendants benefited improperly from the transfer.
The lawsuit further asserts that Zhao’s November 6, 2022, tweet fostered a market panic, accelerating FTX’s collapse due to massive withdrawals. For context, the post announced Binance’s decision to liquidate its remaining FTT holdings. The action is part of FTX’s broader efforts to recover over $11 billion for creditors following its bankruptcy in November 2022.
It’s worth noting that under the U.S. Bankruptcy Code, a trustee or debtor-in-possession may avoid and recover “fraudulent transfers” made within a specific look-back period. Such a move is allowed if the debtor was insolvent at the time of the transfer or if the transfer was made to hinder creditors.
Binance Plays Defensive
Fast-forward to today, and Binance contends that FTX’s collapse resulted from internal fraud organized by the founder, Sam Bankman-Fried. Specifically, the exchange noted that the 2021 share repurchase transaction did not involve the illicit use of customer funds.
Binance argues that FTX has failed to state a plausible claim because there are no facts to support that it knew of FTX’s insolvency when the share repurchase occurred. It cited that FTX remained solvent for over 16 months following the deal.
The largest exchange maintains that its foreign entities are not subject to U.S. personal jurisdiction, and the share repurchase deal was executed outside U.S. territory. It emphasized that Binance Holdings and related entities are organized under the laws of offshore jurisdictions.
Regarding Zhao’s November 2022 tweet, the exchange claims the post is based on publicly available information. The filing noted that Binance publicly disclosed its decision to sell its FTT for “risk management” purposes. It also asserted that FTX provided no facts showing the tweet was false or intentionally deceptive.
Given these defences, the motion describes FTX’s allegations as “pure conjecture” from “a convicted fraudster’s hindsight speculation.”
Meanwhile, FTX’s creditors are scheduled to receive distributions beginning May 30, 2025.
