Binance and the Two Billion Dollar FTX Fallout

Binance has acknowledged in court papers that its own tweets and a short lived takeover offer inflicted damage on FTX, yet the exchange still says it has no obligation to hand back the two billion dollars that moved into its related company, Digital Anchor.

Crypto drama is nothing new, but this tug of war feels different. The stakes include billions of dollars, the credibility of the biggest exchange on the planet, and fresh questions about how global regulators should police companies that can shift assets across borders with a mouse click.

What Exactly Did Binance Admit in Court

Binance filed a response in a Delaware bankruptcy case near the end of April. Buried in the footnotes is a straightforward statement: the firm concedes that key tweets from both Binance and founder Changpeng Zhao, better known as CZ, were crafted with the intent to hurt FTX.

One line from the filing reads, according to court reporter Molly White, “Binance does not dispute that the tweets were designed to reduce confidence in FTX.” In everyday language, Binance is saying it knew the posts would rattle FTX customers and traders, and it pressed send anyway.

The court document also says CZ never meant to complete the proposed takeover of FTX. Lawyers for FTX argue that the offer was a ruse designed to deepen the panic that was already pulling money out of the rival exchange. Binance calls that argument “speculative,” yet offers no evidence that due diligence ever reached a serious stage.

The Tweetstorm that Sparked a Bank Run

A lot has happened in crypto, so a quick refresher helps. On November 6, 2022, CZ tweeted that Binance would sell its entire stash of FTT, the exchange token issued by FTX. The sale was valued at roughly half a billion dollars. He framed the move as risk management, adding that “recent revelations” about FTX’s finances worried him.

Moments later, traders started fleeing FTX. Within forty eight hours, FTX customer balances dropped by an estimated six billion dollars, according to the bankruptcy examiner’s interim report.

Key moments that turned a tweet into a bank run:

• CZ announces the plan to dump FTT.
• Alameda Research CEO Caroline Ellison offers to buy the tokens over the counter, implying that no public dump is needed.
• CZ replies that Binance will stay in the free market.
• Rumors explode on Crypto Twitter that FTX does not have enough liquid assets.
• FTT price falls by more than seventy percent in a single day.

The spiral ended only when FTX locked withdrawals, and by then the damage was done.

Where Did the Two Billion Dollars Go

The two billion dollar question is literally that large. FTX’s restructuring team says the funds were transferred to Binance Capital Management, which has since been renamed Digital Anchor. Binance replies that Digital Anchor is a separate company, incorporated in the British Virgin Islands, with no presence in the United States. Therefore, in Binance’s view, a United States court has no jurisdiction.

Below is a simplified map of the money flow as described in court documents.

FTX advisers say the transfers consist of repayment for an early equity stake Binance once held in FTX, plus profit sharing agreements. They now argue that the money should return to FTX’s creditors because Binance committed misleading acts that caused harm.

Binance counters that the payments were contractual, completed well before the November 2022 collapse, and are now legally outside the reach of the bankruptcy. The fight will likely play out for years unless a settlement appears.

Digital Anchor The Labyrinth of Binance Entities

Digital Anchor popped up on corporate registers only after Binance Capital Management changed its name. According to filings seen by CoinDesk, the entity lists Chengpeng Zhao, the legal spelling in many records, as a director. That alone ties Digital Anchor to Binance’s top leadership.

Binance’s argument hinges on corporate separation. In short, the holding company says: FTX never sued Digital Anchor, Digital Anchor did nothing wrong, so those funds stay put. Critics respond that corporate walls are thin when the same executives call the shots on both sides.

In an interview with The Wall Street Journal, former Commodity Futures Trading Commission attorney Braden Perry remarked, “Courts look at control. If the same leaders swing assets among shells at will, the veil can be pierced.” That precedent is well established in United States case law dating back to the 1940 ruling in Anderson v. Abbott.

The labyrinth of entities has been one of the biggest complaints from watchdogs. Binance has more than one hundred affiliated companies spread across at least twenty jurisdictions, according to a Reuters special investigation published in 2023. That sprawl makes it hard for regulators or courts to pin down responsibility.

Could Regulators Force a Payback

Different regulators see different angles:

• The United States Securities and Exchange Commission accuses Binance of offering unregistered securities and mixing customer funds with corporate funds.
• The Commodity Futures Trading Commission claims Binance illegally offered derivatives to American users.
• The Department of Justice has been silent publicly, yet Bloomberg has reported on a criminal probe that started back in 2018.

Add in the FTX bankruptcy estate, and Binance faces a multi front legal siege.

Experts differ on whether any of these agencies can force a clawback of the Digital Anchor funds. History shows it is possible. In 2014, the SEC persuaded a Cayman Islands hedge fund to return one hundred ninety million dollars to U.S. investors after proving the money was moved offshore to dodge obligations.

Still, the uphill battle is plain. Binance holds no headquarters, keeps servers in multiple countries, and has already withdrawn from several American states.

What This Means for Everyday Crypto Users

If you hold crypto on any exchange, this saga offers at least three lessons.

Self custody is insurance
When assets sit in your own wallet, your exposure to one company’s solvency problems drops to zero. Hardware devices like Ledger or Trezor retail for less than one hundred dollars, which is cheap compared with the risk of losing an entire balance.

Corporate structure matters
Check what entity actually holds your deposits. Binance US, for example, insists it operates separately from the global exchange. But the ongoing litigation highlights that the lines can blur.

Regulatory clarity is still missing
A 2024 survey by Chainalysis showed that sixty two percent of retail traders in North America say unclear rules are their top worry. Until lawmakers lock in uniform standards, every headline about legal trouble stirs more anxiety.

Institutional players get nervous too. Bitwise Asset Management trimmed its Binance exposure from twelve percent to under five percent across its passive index products, according to the firm’s March 2024 rebalancing statement. The ripple effects reach far beyond consumers.

Frequently Asked Questions

What did Binance admit about harming FTX?
Binance acknowledged that tweets from both the corporate account and CZ were intended to reduce confidence in FTX, effectively admitting a role in the rival’s downfall.

Why does Binance refuse to return two billion dollars to FTX creditors?
The exchange says the money was paid to Digital Anchor, a separate legal entity located outside United States jurisdiction, and that Digital Anchor made no false statements.

Is Digital Anchor the same as Binance?
Digital Anchor was formerly called Binance Capital Management and shares leadership ties with CZ, but Binance argues it is a distinct company under British Virgin Islands law.

Can a United States court force Digital Anchor to pay back the funds?
A court could try by proving fraudulent transfer or piercing the corporate veil, yet doing so would involve complex cross border enforcement that can drag on for years.

Did Binance ever plan to buy FTX?
Court filings from both sides suggest the takeover offer was never serious; Binance has not provided documentation of due diligence, and FTX calls the proposal a tactical move to erode trust.

What steps can crypto users take to protect themselves from similar collapses?
Move long term holdings to personal wallets, diversify among custodians if you need liquidity, and monitor public financial disclosures or proof of reserves for any exchange you use.

Will regulators tighten rules because of this dispute?
Most likely yes. Draft legislation in the European Union and multiple bills in the United States Congress cite the FTX crash as a key reason for stricter oversight of exchange tokens and corporate governance.

Does this legal battle affect the price of Binance Coin BNB?
BNB has shown added volatility when major court filings appear, but no sustained trend yet. Traders should watch liquidity data and open interest on futures markets for early signs of structural stress.

Conclusion

Binance may have admitted it had a hand in knocking down FTX, but getting two billion dollars back is far from certain. Share this article with friends who follow the crypto space and drop your thoughts or questions in the comments.