- Binance faces the looming risk of a significant loss amid heated battles with crypto regulators.
- The FTX estate is knocking on the crypto exchange’s doors.
- The development picks up on the trail of FTX’s divorce from Binance.
At a time when the crypto exchange has reportedly been forced to cut about 1,000 jobs, such a financial loss could leave the firm’s business hanging in the balance. Will Binance be able to fend off what could be a crippling outflow?
FTX Seeks $2.1 Billion Binance Clawback
Details buried in documents filed by FTX bankruptcy administrators on Monday, July 31, that have made the rounds on X reveal that the estate is seeking to claw back a $2.1 billion payment to Binance as part of a buyout deal in July 2021.
Per the document, officials held at least four meetings in June to discuss recouping the payment initially made in a mix of FTT and BUSD tokens.
At the time of writing, Binance and FTX administrators are yet to return a request for comment.
The $2.1 billion payment has long been at the center of the FTX debacle, with one of the exchange’s proponents at one point pinning the platform’s collapse on the payment.
The Fallout of a Bad Divorce
Binance, an early investor in FTX, had received the $2.1 billion payment in exchange for its 20% stake in the now-defunct crypto trading platform.
The circumstances surrounding Binance’s buyout remain unclear as Binance Chief Executive Officer Changpeng “CZ” Zhao and disgraced FTX founder Sam Bankman-Fried have made varying claims about the deal following FTX’s collapse.
Still, the $2.1 billion fund played a key role in the FTX debacle. Binance’s announcement that it planned to dump FTT received from the deal worth over $500 million on the open market has often been credited for kickstarting the bank run on FTX. However, others have tipped former Alameda CEO Caroline Ellison’s desperate public attempt to buy Binance’s FTT holdings over the counter at a premium as the trigger.
At one point, paid FTX spokesperson Kevin O’Leary argued that the buyout deal marked the beginning of FTX’s financial woes. Members of the crypto community and Zhao have fiercely resisted this view.
On the Flipside
- There is no certainty that FTX will be able to secure a refund of the $2.1 billion payment.
- Binance raked in an estimated $12 billion in annual revenue in 2022.
Why This Matters
Such a clawback could significantly weigh down Binance’s business amid recent regulatory troubles and layoffs. At the same time, an extra $2.1 billion could significantly boost FTX creditors, with funds tied up or incomplete in the wake of the exchange’s collapse.
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