The legal confrontation between Binance and the FTX estate escalated last week, with Binance filing a motion in a Delaware bankruptcy court to dismiss a $1.76 billion clawback lawsuit brought by FTX's liquidation team.
The filing seeks to shut down claims that Binance and its former CEO Changpeng Zhao played a role in the collapse of FTX, one of the most high-profile failures in crypto history.
The lawsuit, initially filed in November 2023 by the FTX Recovery Trust, aims to recover approximately $1.76 billion in assets transferred to Binance as part of a July 2021 transaction. This transaction involved FTX buying back a 20% equity stake it had previously sold to Binance in 2019. The buyback was executed using a mix of Binance Coin (BNB), Binance USD (BUSD), and FTX's own FTT tokens.
According to the FTX estate, this repurchase was funded with misappropriated customer assets at a time when FTX was already insolvent. As such, the suit argues, the transfer should be unwound and the funds returned to the estate under bankruptcy clawback provisions.
Binance's Defense: Jurisdiction, Timing, and Tweets
In its motion to dismiss, Binance denies any liability, arguing that the claim lacks legal merit and is unsupported by evidence. The exchange contends that FTX was solvent for over a year after the 2021 transaction and continued operating as a "going concern" until its dramatic collapse in November 2022.
Binance’s legal team asserts that the clawback attempt is a deflection tactic aimed at blaming external parties for internal failures at FTX. Specifically, the motion highlights the criminal conviction of Sam Bankman-Fried, the FTX founder who was sentenced to 25 years in prison for orchestrating a multibillion-dollar fraud scheme. Binance maintains that the root cause of the collapse lies within FTX itself.
In addition, Binance challenges the court's jurisdiction, asserting that none of the Binance-related corporate entities are domiciled in the United States, nor were the transactions conducted on U.S. soil. This jurisdictional argument is central to Binance's strategy to have the suit thrown out before entering the discovery phase.
Social Media Role Under Scrutiny
Another key element of the FTX estate's complaint is Binance's public statements leading up to FTX's failure. In particular, the lawsuit alleges that Changpeng Zhao’s tweets on November 6, 2022, announcing that Binance would liquidate its FTT holdings, were strategically timed to destabilize FTX and incite a wave of withdrawals.
The Binance filing refutes this, arguing that the tweets merely disclosed Binance’s intent to manage its portfolio following public reporting from CoinDesk, which revealed major discrepancies in the financial relationship between FTX and its sister hedge fund, Alameda Research. Binance states there is no factual basis to claim the tweets were misleading or malicious in nature.
Legal Experts Weigh In
Dhrupad Das, a crypto-focused attorney and founding partner at Panda Law, described Binance's motion as a multi-pronged defense. "Binance is arguing that the court lacks personal jurisdiction, that the 2021 share repurchase is shielded under safe-harbor provisions, and that any tort-based claims fall outside the scope of the bankruptcy court," Das told Decrypt. He added that the motion’s outcome could significantly narrow the case or shut it down entirely.
Should the court deny the motion, the case would enter discovery, opening the door for document production, depositions, and potential settlement talks. A full dismissal, on the other hand, would bring this particular clawback effort to a close, although other suits from the FTX estate remain ongoing.
Broader Context: FTX’s Recovery Efforts
Since declaring bankruptcy in November 2022, the FTX estate has launched numerous lawsuits to recover billions in assets transferred to other crypto firms, investors, and insiders. These clawback suits, permitted under bankruptcy law, aim to retrieve funds transferred while FTX was insolvent or made under preferential terms.
Targets have included venture capital firms, former executives, and high-profile counterparties across the crypto industry. The Binance case is one of the largest and most high-profile among these efforts due to the dollar amount involved and Binance’s prominent role in the global crypto exchange market.
FTX’s bankruptcy proceedings remain one of the largest in crypto history. At its peak, the platform handled billions in daily trading volume and claimed millions of users globally. Its implosion, prompted by a liquidity crisis in November 2022, exposed a multibillion-dollar shortfall in customer funds.
The Legal Stakes for Binance
For Binance, the case comes as the company continues to face regulatory scrutiny in multiple jurisdictions. In 2023, Binance settled U.S. charges related to anti-money laundering and sanctions violations for $4.3 billion and saw the departure of longtime CEO Changpeng Zhao, who pleaded guilty as part of the resolution.
Although unrelated to the FTX lawsuit, the settlement added pressure to the exchange’s global operations, with regulators in Europe and Asia tightening oversight. A prolonged legal battle with the FTX estate could further entangle the company in reputational and legal risks, even if the underlying claims are ultimately dismissed.
Jurisdictional Arguments and Safe-Harbor Defense
The jurisdictional question may prove pivotal. Binance argues that the entities involved in the 2021 transaction are foreign-registered and not subject to Delaware court authority. If the court agrees, the case could be dismissed on procedural grounds without evaluating the substantive claims.
Binance also cites bankruptcy code provisions known as "safe harbor" rules, which can shield certain financial transactions - like securities contracts - from clawback if they were conducted in the ordinary course of business. Whether the 2021 share buyback qualifies under these protections is likely to be contested.
A Pattern of Litigation in FTX’s Wind-Down
The FTX estate's approach mirrors traditional bankruptcy recovery strategies but with a crypto twist. In addition to Binance, FTX has sued K5 Global, Modulo Capital, and even celebrities who endorsed the platform. The estate is also working to unwind payments to political campaigns and donations to nonprofits made during the exchange’s meteoric rise.
Legal observers note that while many of the estate’s suits may face uphill battles proving fraud or insolvency at the time of transfer, the volume and variety of cases show the aggressive scope of its recovery effort.
Next Steps in the Court Process
The Delaware court will now evaluate Binance’s motion to dismiss, which is likely to prompt a formal response from the FTX estate. A hearing date will be set for oral arguments, after which the judge will decide whether the case proceeds or ends at this preliminary stage.
Even if dismissed, the suit highlights the tangled web of transactions, relationships, and liabilities that continue to emerge from the FTX collapse. It also underscores the lingering legal exposure facing crypto firms that once did business with FTX.
Final thoughts
The Binance-FTX lawsuit is emblematic of the broader legal reckoning still rippling through the crypto sector. As bankruptcy courts attempt to sort through the aftermath of multibillion-dollar collapses, the line between culpability and coincidence remains murky. Binance’s attempt to shut down the FTX estate’s $1.76 billion claim signals that the next chapter of crypto’s legal evolution is being written in courtrooms rather than code.
Until a resolution is reached, the case will remain a key test of how U.S. bankruptcy law applies to crypto-era disputes - and whether foreign entities like Binance can be held accountable in U.S. courts for transactions executed well outside their borders.