Binance and its former CEO Changpeng Zhao (CZ) have filed a motion to dismiss a $1.76 billion lawsuit brought by FTX’s bankruptcy estate, claiming that the case lacks jurisdiction and that FTX alone is responsible for its financial collapse. The motion, filed on May 16 in Delaware bankruptcy court, marks the latest chapter in the long-running fallout from FTX’s dramatic implosion in 2022.
Binance Challenges Legal Grounds of FTX Lawsuit
At the heart of the lawsuit is a $1.76 billion transaction from July 2021, when FTX repurchased equity from Binance as part of a divestment deal. At the time, Binance had been one of FTX’s largest early investors but exited its position ahead of the now-infamous collapse. The FTX Recovery Trust, which is tasked with recouping assets for creditors, claims that the repurchase constituted a fraudulent transfer that should be clawed back.
Binance, however, argues that the payment is protected under bankruptcy “safe harbor” provisions, as it was executed under a securities contract. The motion states that these types of transactions are exempt from clawbacks under U.S. bankruptcy code, effectively nullifying FTX’s claim.
CZ’s Role Under Scrutiny Binance Pushes Back
The lawsuit further alleges that Changpeng Zhao’s social media posts contributed to a panic that fueled a bank run on FTX in November 2022, shortly before its collapse. The FTX legal team frames Zhao’s actions as part of a deliberate “campaign to destroy FTX.”
Binance’s response was firm: “Plaintiffs’ only support for this theory is pure conjecture much of it sourced from a convicted fraudster’s hindsight speculation.” The statement refers to Sam Bankman-Fried, the disgraced founder of FTX, who was convicted on fraud and conspiracy charges in 2023.
Binance maintains that Zhao’s comments were truthful and based on public information, dismissing the suggestion of coordinated malice as unfounded.
Jurisdiction Dispute and Blame on FTX
A key pillar of Binance’s motion is the jurisdictional challenge. The exchange notes that all three FTX entities involved are incorporated outside the U.S., specifically in the Cayman Islands and Ireland, while Binance itself is also a non-U.S. entity. Therefore, Binance argues that the Delaware court lacks the authority to adjudicate the case.
Furthermore, Binance places full responsibility for the collapse of FTX on Sam Bankman-Fried and FTX leadership, pointing to “pervasive malfeasance” and “ongoing fraud” cited within the FTX lawsuit itself.
Industry Impact and What’s Next
The legal battle highlights the deep fractures within the crypto industry following FTX’s demise. With over $8 billion in customer funds lost, creditors and trustees continue to pursue aggressive legal action against parties tied to FTX’s past operations.
As Binance seeks to dismiss the lawsuit entirely, the court’s ruling on jurisdiction and safe harbor protections could set a significant precedent for how crypto-related bankruptcies are litigated going forward.
