Binance CZ asks a U.S. bankruptcy court to drop a $1.76 billion claim by FTX, arguing the case oversteps jurisdictional bounds.
Binance co-founder Changpeng Zhao (CZ) has moved to dismiss a lawsuit filed by the FTX estate seeking to recover $1.76 billion. The case, tied to a 2021 share repurchase deal, alleges Binance and its former executives received funds improperly transferred by Sam Bankman-Fried.
Zhao, in a filing submitted Monday in the U.S. Bankruptcy Court for the District of Delaware, challenged the court’s authority to hear the case. He emphasized that he is a UAE resident, and the disputed transactions took place outside the United States.
“No U.S. Nexus,” Zhao’s Lawyers Argue
According to Zhao’s legal team, neither the involved entities nor the financial transfers had U.S. roots. Binance’s affiliated companies operate out of overseas jurisdictions, such as Europe and the Caribbean. The funds, reportedly routed through Alameda Ltd., originated from a firm based in the British Virgin Islands.
Because of this, Zhao claims that U.S. bankruptcy law doesn’t apply. He labeled the attempt to stretch the law across borders as unsupported.
FTX Accuses Binance of Fraudulent Transfer
Notably, the FTX trust, along with FTX Digital Markets Ltd., filed the lawsuit in November 2024. They allege Zhao and other Binance executives received large sums in a share buyback deal with Bankman-Fried. Specifically, Binance is reported to have sold back 20% of its stake in FTX’s global entity and 18.4% in its U.S. division.
Two Binance executives named in the lawsuit also filed to be excluded from the case. Their filings echo Zhao’s arguments about jurisdiction and legal overreach.
Zhao Denies Role in FTX Collapse
Zhao’s filing described him as merely a “nominal counterparty” in the transaction. He argues the FTX estate is wrongfully blaming him and Binance for Sam Bankman-Fried’s misconduct and the company’s collapse.
CZ also noted that Binance and FTX had a short-lived business relationship. He said the firms parted ways due to “personal grievances,” which led to an equity-for-crypto settlement.
Jurisdiction and Legal Standards in Question
Zhao’s legal team argues that serving U.S. counsel on a foreign national doesn’t meet bankruptcy law requirements. They also claim the suit doesn’t meet legal standards for constructive fraud. They invoked safe harbor provisions under U.S. securities law that protect certain financial transactions from a clawback.
Zhao recently served a four-month sentence in the U.S. after pleading guilty to anti-money-laundering violations. Bankman-Fried, meanwhile, is serving a 25-year prison term for fraud and conspiracy tied to FTX’s downfall.
Zhao is represented by a law firm based in the United States. Meanwhile, the FTX estate has retained two separate legal teams to pursue the lawsuit.
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