CZ Seeks Dismissal of $1.8 Billion FTX Clawback Lawsuit Over Offshore Transaction

Changpeng Zhao, founder and former CEO of Binance, has filed a motion to dismiss a $1.8 billion lawsuit brought by the FTX bankruptcy estate. The suit, originally filed in Delaware in November 2024, seeks to recover funds from a 2021 share buyback agreement between Binance and FTX. Zhao’s legal team argues that U.S. courts lack jurisdiction due to the offshore nature of the transaction, which involved entities in the Cayman Islands, the British Virgin Islands, and Ireland. The motion also claims that Zhao was a “nominal counterparty” with no direct control over the assets in question [1].

The FTX liquidators allege that the buyback was funded with customer deposits and constitute a fraudulent transfer. They also accuse Binance and Zhao of contributing to FTX’s collapse by selling its native token, FTT, in November 2022. This, they argue, triggered a liquidity crisis and a subsequent bank run on the platform [2]. Zhao denies these claims, calling the lawsuit “legally unfounded” and “outright incoherent.” His defense further notes that Binance once held a 20% stake in FTX, but the relationship was terminated due to irreconcilable differences [3].

The legal strategy employed by Zhao centers around jurisdictional arguments and the assertion of limited personal involvement. If successful, the dismissal would significantly reduce Binance’s liability exposure and potentially set a precedent for how courts handle offshore digital asset transactions. The case underscores the growing challenges of applying traditional legal frameworks to the crypto industry, where transactions frequently cross international borders and operate in legal gray areas [4].

This lawsuit is one of several legal fronts in FTX’s broader restructuring process. The crypto exchange collapsed in November 2022 following revelations of severe financial mismanagement and fraud. The fallout left billions in losses for investors and sparked a wider crisis of trust in the digital asset market. FTX is now seeking to recover assets through litigation, including this high-profile case against Binance and its founder [5].

Zhao’s defense strategy aligns with broader trends among crypto executives seeking to limit personal liability in high-stakes legal disputes. If the court grants the motion to dismiss, it could signal a shift in how such cases are handled, particularly when international parties and digital assets are involved [6].

Source:

[1] title: CZ Moves to Dismiss FTX's $1.8 Billion Crypto Lawsuit

url: https://www.cointribune.com/en/cz-moves-to-dismiss-ftxs-1-8-billion-crypto-lawsuit/

[2] title: CZ Seeks Dismissal Of "Nonsensical" $1.76B FTX ...

url: https://99bitcoins.com/news/altcoins/cz-seeks-dismissal-of-nonsensical-1-76b-ftx-clawback-lawsuit/

[3] title: Binance founder moves to dismiss $1.8B lawsuit

url: https://www.thestreet.com/crypto/markets/binance-founder-moves-to-dismiss-1-8b-lawsuit

[4] title: Changpeng Zhao Asks To Toss $1.8B FTX Clawback Suit

url: https://cointelegraph.com/news/binance-zhao-dismissal-ftx-clawback-lawsuit

[5] title: FTX Declares War On Binance And Zhao For Triggering A Liquidity Crises

[6] title: Ex-Binance CEO Seeks Dismissal From $1.8B FTX ...

url: https://www.xt.com/en/blog/post/ex-binance-ceo-seeks-dismissal-from-1-8b-ftx-clawback-suit