Binance, the world’s largest cryptocurrency exchange, has filed a motion to dismiss a US$1.76 billion lawsuit from the FTX estate.

This motion, submitted to a Delaware court on May 16, 2025, contends that the claims lack jurisdiction and are based on unsubstantiated allegations.

FTX’s lawsuit claims that Binance and its co-founder, Changpeng Zhao, were involved in actions that contributed to the downfall of the cryptocurrency platform.

Binance’s lawyers argue that FTX is attempting to shift responsibility for its collapse, which they attribute to former CEO Sam Bankman-Fried’s alleged wrongdoing.

Bankman-Fried was convicted in 2024 and sentenced to 25 years in prison for fraud.

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🔗 Source: The Block

🧠 Food for thought

1️⃣ The FTX collapse exemplifies a pattern of regulatory gaps in cryptocurrency exchanges

The FTX bankruptcy in November 2022 revealed an $8 billion hole in its accounts due to mismanagement and embezzlement, highlighting the consequences of inadequate oversight in crypto exchanges 1.

This case follows a historical pattern where regulatory frameworks have struggled to keep pace with innovation. Cryptocurrency regulation has evolved gradually since Bitcoin’s inception, with most major regulatory actions occurring reactively after market failures 2.

The fragmented nature of crypto regulation across jurisdictions created a regulatory arbitrage opportunity that exchanges like FTX exploited, operating with less oversight than traditional financial institutions 3.

The current Binance-FTX dispute over jurisdiction reflects this ongoing challenge, where even basic questions about which regulatory bodies have authority remain contested. In the U.S. alone, the SEC, CFTC, and IRS each claim different aspects of regulatory control 4.

The collapse prompted increased calls for comprehensive regulation, with experts emphasizing the need for a unified approach to address the unique challenges of cryptocurrency markets 5.

2️⃣ Market interconnectedness in crypto creates systemic risks beyond individual failures

The FTX collapse triggered measurable ripple effects across the entire cryptocurrency market, with Bitcoin falling 16%, Ethereum dropping 24%, and Solana plummeting 41% following the bankruptcy 6.

This market reaction demonstrates how deeply interconnected major cryptocurrency platforms have become, creating systemic risk patterns similar to those in traditional financial markets 5.

The interconnectedness extended beyond price impacts to institutional stability, with other crypto firms like BlockFi and Voyager Digital facing bankruptcy after FTX’s collapse due to financial exposures between platforms 5.

FTX’s failure, despite being valued at $32 billion just months before bankruptcy, shows how quickly liquidity can evaporate in crypto markets when confidence is shaken, regardless of a company’s apparent financial strength 7.

The current legal dispute over the $1.76 billion clawback highlights how the unwinding of collapsed exchanges can impact multiple market participants years after the initial failure, creating ongoing market uncertainty 1.

Recent Binance developments

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