Binance has submitted a motion to dismiss a $1.76 billion lawsuit initiated by the FTX estate, alleging that the collapsed crypto exchange is attempting to shift blame for its own downfall.
Submitted on May 16 in the Delaware Bankruptcy Court, Binance’s legal representatives described the lawsuit as “legally insufficient,” asserting that FTX’s downfall was not caused by market manipulation or malicious actions but by internal wrongdoing.
“Plaintiffs are acting as if FTX did not collapse due to one of the largest corporate frauds in history,” the document stated, referencing Sam “SBF” Bankman-Fried’s conviction on seven charges of fraud and conspiracy.
FTX’s estate contends that Binance obtained billions in cryptocurrency during a 2021 buyback agreement, funded inappropriately using customer funds.
Binance disputes this assertion, claiming that “FTX was a going concern for 16 months” post the share buyback and that there was “no credible assertion” the exchange was insolvent at that period.
Related: Binance requests arbitration for all participants in securities class suit
Zhao’s tweet and FTT decline
The lawsuit further charges former Binance CEO Changpeng Zhao with instigating a collapse via a tweet on Nov. 6, 2022, announcing the liquidation of FTT tokens.
In its defense, Binance contended that Zhao’s tweet was grounded in publicly available concerns. “Binance’s choice to liquidate its remaining FTT was indeed ‘due to recent revelations’—specifically, the Nov. 2, 2022, CoinDesk article” that disclosed Alameda Research’s balance sheet.
The company further justified Zhao’s remark about Binance intending to minimize market impact. “The Complaint lacks any factual basis” to demonstrate that Binance had no intention of proceeding with it.
While contesting the court’s jurisdiction, Binance indicated that none of the foreign entities mentioned “are incorporated or hold their principal business location in the United States,” thus falling outside the court’s jurisdiction.
The document also critiques the plaintiff’s narrative as “a collection of state law claims” based on “sheer speculation—much of it derived from a convicted fraudster’s retrospective conjecture.”
Binance has requested the court to dismiss all claims with prejudice. The FTX estate has yet to respond.
Related: FTX EU creditors can now withdraw funds from Backpack exchange
FTX to distribute $5 billion in second phase of creditor repayments
FTX is poised to commence its second phase of repayments to creditors more than two years following its bankruptcy filing.
In a notice dated May 15, the FTX Recovery Trust declared that over $5 billion will be distributed starting May 30 through BitGo and Kraken, targeting entities in the second eligible category under the exchange’s reorganization approach.
According to the strategy, five creditor groups designated as “convenience classes” are projected to receive between 54% and 120% of their claims. In total, FTX could repay up to $16 billion, contingent on the final tally of valid claims.
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