Binance, Zhao Argue Tweets Did Not Cause FTX Downfall in Motion to Dismiss Lawsuit
On Wednesday, July 24, 2024, crypto firm Binance Holdings Ltd. and its former CEO Changpeng Zhao filed a motion to dismiss a lawsuit seeking to hold them responsible for the collapse of FTX. Binance and Zhao argued in their filing that two tweets by Zhao did not cause the demise of FTX and that the lawsuit’s claims have no merit.
The motion aims to dismiss a class action suit brought by Nir Lahav, an FTX user, that was consolidated into the multidistrict litigation regarding FTX’s collapse. Lahav claimed Binance and Zhao leaked information in an attempt to damage competitors and misled investors with two tweets about selling Binance’s FTT tokens and talks to acquire FTX during its liquidity crisis.
However, Binance argued the tweets were truthful statements made after issues at FTX had already begun. They also maintained that Zhao and Binance did not have any intent to mislead and were genuinely considering acquiring FTX at the time. More importantly, Binance stated that the root cause of FTX’s failure was the misappropriation of customer funds by FTX executives like CEO Sam Bankman-Fried, not any tweets by Zhao.
Binance further argued that neither Zhao nor Binance have sufficient ties to warrant jurisdiction in a U.S. court. Additionally, Lahav did not allege purchasing any digital assets, precluding securities law claims. Finally, Binance noted that any damages arose from customers being locked out of FTX after its bankruptcy, not the tweets themselves.
In a separate filing, Binance’s U.S. entities BAM Trading Services and BAM Management similarly sought dismissal, stating Lahav’s complaint did not make any allegations about their involvement in the tweets at the center of the case.
If accepted by the court, the motions would dismiss Binance and its entities, as well as Zhao in his individual capacity, from the consolidated lawsuit. However, broader litigation continues against other parties accused of enabling FTX’s downfall through alleged regulatory failures and irresponsible promotion.
The case is playing out as Zhao serves a four-month prison sentence resulting from an earlier plea deal between Binance and U.S. regulators over anti-money laundering lapses.
Please contact BlockTribune for access to a copy of this filing.
