Binance Faces Gargantuan Losses as FTX Looks to Claw Back Funds

• 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.

Binance, the world’s largest crypto exchange, can not seem to catch a break. The firm faces the looming risk of a significant financial loss even as it attempts to fend off global regulatory woes.

At a time when the crypto exchange has reportedly been forced to cut about 1000 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 made 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. This view has been fiercely resisted by members of the crypto community and Binance’s Zhao.

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 be a significant boost for FTX creditors, with funds tied up or incomplete in the wake of the exchange’s collapse.

Read this to learn more about plans to restart FTX’s international exchange:

FTX Plans to Reopen its Doors but Steers Clear of U.S

Binance is returning to Japan in style. Find out more:

Binance Returns to Japan with Competitive Edge Despite Global Troubles