Binance, one of the largest cryptocurrency exchanges in the world, has filed a motion to dismiss a $1.76 billion clawback lawsuit initiated by John Ray III, the bankruptcy trustee for the collapsed FTX platform.
FTX Trustee Accuses Binance Of Improper Withdrawals
The lawsuit alleges that Binance withdrew significant funds from FTX shortly before its insolvency became publicly known in late 2022, which seeks to recover these funds for redistribution among FTX’s creditors, who have been severely affected by the exchange’s downfall.
The lawsuit claims that Binance improperly withdrew approximately $1.76 billion from FTX just before the financial troubles of the exchange became apparent. After FTX declared bankruptcy in November 2022, Ray was appointed as the new CEO and trustee, tasked with overseeing the liquidation of assets and recovery efforts for creditors.
The allegations suggest that Binance, once led by its co-founder and CEO Changpeng Zhao (CZ) at the time, engaged in actions that not only destabilized FTX but also contributed to its catastrophic failure.
In its defense, Binance argues that the claims against it are “legally deficient” and should be dismissed outright. The exchange contends that the lawsuit is fundamentally flawed for two main reasons.
Claims Of Competitive Dynamics, Not Illegal Actions
Firstly, it seeks to recover funds related to a share repurchase agreement from July 2021, in which FTX bought back shares from Binance. Binance maintains that this transaction was legitimate and part of a standard business agreement.
Secondly, the lawsuit includes allegations concerning tweets made by Binance CEO CZ in November 2022, which the plaintiffs claim contributed to FTX’s collapse. Zhao’s tweets indicated Binance’s intent to liquidate its holdings of FTX’s native token, FTT, following alarming reports about FTX’s financial health.
Binance emphasizes that these tweets were directed at a global audience rather than specifically targeting US residents. As a result, they argue that the claims do not establish sufficient jurisdiction for the lawsuit.
The exchange asserts that the allegations stem from competitive dynamics rather than any unlawful actions, aiming to protect its reputation as a leading player in the cryptocurrency market.
The exchange’s response follows FTX’s efforts to distribute funds to affected creditors, with an upcoming batch of payouts scheduled for the end of the month. As reported by Bitcoinist, the defunct crypto exchange plans to distribute over $5 billion to creditors on May 30 as part of its second distribution.
When writing, BNB, the fifth largest cryptocurrency in terms of capitalization, trades at $653, recording a 9% recovery in the monthly time frame.
Featured image from DALL-E, chart from TradingView.com
