Binance Challenges FTX’s $1.76B Clawback Suit, Citing Insolvency Disputes and Jurisdiction

Highlights:

• Binance seeks dismissal of FTX’s $1.76B clawback suit, citing jurisdiction and legal flaws.
• FTX operated for 16 months after the buyback, undermining insolvency claims.
• Zhao’s post about FTT liquidation was founded on publicly available information.

Binance has requested the Delaware bankruptcy court to drop the lawsuit launched by the FTX estate, amounting to $1.76 billion. The case is about a 2021 transaction of crypto between these two companies. Binance believes the accusations are unproven and sees internal fraud at FTX as the reason for the company’s failure. The exchange claims that the court does not hold jurisdiction over the foreign entities.

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JUST IN: BINANCE SEEKS DISMISSAL OF FTX’S $1.76B LAWSUIT, CALLS CLAIMS BASELESS AND OUTSIDE U.S. JURISDICTION

Source: @Crypto_Briefing pic.twitter.com/TLBQ6FXCUv

— Mario Nawfal’s Roundtable (@RoundtableSpace) May 20, 2025

Dispute Over 2021 Binance Crypto Share Repurchase Deal

The controversy arose after a 2021 deal in which FTX bought back a 20% equity stake from Binance. The payment consisted of cryptocurrencies such as Binance Coin (BNB), BUSD stablecoins and the FTT tokens issued by FTX. The FTX estate alleges that the company got the funds for the repurchase from customers’ money and was insolvent at the time.

However, Binance claims the FTX business was still operating as a going concern for nearly 16 months after the transaction. The lawyers at Binance affirm that there was no plausible evidence of insolvency at the time the buyback took place. This argument opposes the FTX estate’s attempt to claw back the funds.

FTX sues Binance and ex-CEO Changpeng Zhao (CZ), seeking $1.8 billion. pic.twitter.com/LzvxgzFYx1

— cryptothedoggy (@cryptothedoggy) November 11, 2024

Binance also points out that all of the parties in the transaction are located outside the United States. The firm claims that the court does not have the authority to handle the aspects of the case related to foreign countries. Furthermore, a challenge involving the court’s jurisdiction may affect how the case progresses.

Twitter Post Controversy and Market Impact

One main reason for the argument is a tweet by Binance’s CEO, Changpeng Zhao, on November 6, 2022. Zhao revealed in his statement that Binance would sell their FTT tokens due to recent information. According to the estate, the statements made customers frightened, leading them to withdraw their funds, which was a big factor in the company’s collapse.

As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4

— CZ 🔶 BNB (@cz_binance) November 6, 2022

Binance points out that the tweet referenced reliable public information from CoinDesk’s November 2, 2022, report about the state of Alameda Research’s balance sheet. The exchange claims Zhao’s statement was accurate and meant to minimize any disruption to the market. The legal team claims the lawsuit does not offer evidence that disputes the accuracy of Zhao’s statements.

The clash emphasizes how public comments were connected to the collapse of FTX. Despite Binance’s argument that their actions were justified, the FTX estate is pointing to the exchange’s communication.

Broader Legal Battle and FTX Creditor Repayments

The lawsuit is one of FTX’s efforts to recover money for its creditors. Following the bankruptcy of FTX, the estate is said to be responsible for repaying creditors more than $11 billion. Court documents state that starting May 30, FTX will begin to pay back over $5 billion through transfer platforms such as BitGo and Kraken.

According to the plan, creditors should receive 54% and 120% of their claims following the review. However, the total recoverable value could reach as high as $16 billion.

Meanwhile, Binance wants for all accusations to be dismissed with prejudice and argues that FTX’s opinions are hindsight opinions from someone convicted of fraud. The exchange considers the lawsuit a way for Sam Bankman-Fried to dodge responsibility. SBF is presently serving 25 years in federal prison for orchestrating a multi-billion-dollar fraud.

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