Binance Founder Challenges $1.76B FTX Claim Over Jurisdiction

Changpeng Zhao, the founder of Binance and known as CZ, has filed a motion with the U.S. Bankruptcy Court for the District of Delaware seeking to dismiss a $1.76 billion claim brought by the FTX estate, arguing that the case exceeds the court’s jurisdictional authority [1]. The lawsuit, initiated by FTX Digital Markets Ltd. and the FTX trust in November 2024, accuses Zhao and other Binance executives of participating in a fraudulent transfer through a 2021 share repurchase deal [1]. According to the FTX estate, Binance received large sums from FTX in exchange for shares in FTX’s global and U.S. entities, with Binance reportedly selling back a 20% stake in the global operation and 18.4% in the U.S. division [1].

Zhao’s legal team has countered these allegations, asserting that the transactions occurred outside the United States and involved Binance entities registered in Ireland, the Cayman Islands, and the British Virgin Islands [1]. As a resident of the United Arab Emirates, Zhao claims no U.S. connection to the deal and argues that U.S. bankruptcy law does not apply extraterritorially. His lawyers emphasize that the court lacks jurisdiction over the matter and that the financial transactions are protected under U.S. safe harbor provisions designed to shield certain financial deals from clawback attempts [1].

The filing further criticizes the lawsuit as an attempt to misattribute responsibility for FTX’s collapse to Zhao, who is described as a “nominal counterparty” rather than a central player in the events leading to the exchange’s downfall [1]. Zhao has denied any significant role in the business arrangement and suggested the FTX estate is unfairly shifting blame away from Sam Bankman-Fried. He also characterized the legal action as “extraterrestrial,” lacking both geographic and legal grounding in the U.S. [1].

In addition to Zhao, two other Binance-linked executives—Samuel Wenjun Lim and Dinghua Xiao—have also sought dismissal of the claims against them, arguing the allegations are unfounded and lack legal basis [1]. Zhao’s legal team has further highlighted that the suit fails to meet the legal standards for constructive fraud under U.S. bankruptcy law and that the service of legal notice on a foreign national does not fulfill the requirements of U.S. bankruptcy law [1].

The case has broader implications for how U.S. law applies in cross-border cryptocurrency transactions. Zhao, who recently served a four-month prison sentence in the U.S. for anti-money laundering violations, is represented by a U.S.-based law firm [1]. The FTX estate, meanwhile, has engaged two separate legal teams to pursue the case [1]. Zhao’s legal strategy centers on challenging jurisdiction and emphasizing the international nature of the deal, with his team suggesting the FTX estate is attempting to expand U.S. legal authority beyond its proper scope [1].

Source: [1] Binance Founder CZ Seeks Dismissal of $1.76B FTX Lawsuit (https://thecryptobasic.com/2025/08/06/binance-founder-cz-seeks-dismissal-of-1-76b-ftx-lawsuit/)