Zhao Challenges Jurisdiction in FTX's $1.76B Clawback Lawsuit

Changpeng Zhao, co-founder and former CEO of Binance, has filed a motion to dismiss a $1.76 billion lawsuit brought by the FTX bankruptcy estate in the Delaware Bankruptcy Court. The legal action, initiated by FTX Digital Markets Ltd. and the FTX Trading estate, seeks to recover crypto assets transferred to Binance in July 2021 as part of an equity repurchase deal. Zhao’s legal team argues that U.S. courts lack jurisdiction over him and that he was improperly served due to his non-U.S. residency in the United Arab Emirates [1]. The motion asserts that Delaware courts have no personal jurisdiction over Zhao, as he has no significant ties to the state [2].

The lawsuit centers on a 2021 buyback deal in which FTX repurchased a 20% stake held by Binance. According to the FTX estate, the funds used for this transaction included assets later determined to be misappropriated from customer deposits. Zhao’s motion contends that he was not a direct recipient of the funds in question, stating that he was merely a “nominal signatory” in the transaction [3]. The filing also challenges the legal basis of the claims, calling them “incoherent” and “legally unfounded” [4].

Beyond the repurchase, the lawsuit accuses Zhao of playing a role in exacerbating FTX’s collapse. It points to a November 2022 tweet from Zhao, in which he announced Binance’s decision to liquidate remaining FTT tokens following revelations about FTX’s insolvency. The tweet is alleged to have triggered a wave of customer withdrawals from FTX, contributing to its eventual collapse [5]. The FTX estate is seeking to recover the transferred assets to help repay creditors affected by FTX’s 2022 collapse.

Zhao’s motion also references previous legal actions taken by other Binance executives, who filed similar dismissal requests in July 2024. The outcome of this motion could establish a precedent for how U.S. courts handle cross-border digital asset transactions in bankruptcy proceedings. Legal experts note that Zhao’s jurisdictional challenge may complicate the FTX estate’s efforts to pursue its claims, forcing the court to determine whether the case should be moved to a different jurisdiction [6]. This development is expected to prolong the legal battle and increase uncertainty in the ongoing FTX recovery process.

Zhao has previously faced regulatory scrutiny from U.S. authorities, including a four-month prison sentence in 2023 after pleading guilty to violating anti-money laundering rules. As part of a $4.3 billion settlement with U.S. regulators, he stepped down as Binance CEO [7]. His legal defense in the FTX case reflects a broader strategy of challenging the legitimacy of U.S. court jurisdiction over international cryptocurrency transactions.

Source:

[1] title: Binance Founder Changpeng Zhao Files Motion to Dismiss $1.8B FTX Lawsuit (https://decrypt.co/333710/binance-founder-changpeng-zhao-files-motion-to-dismiss-1-8b-ftx-lawsuit)

[2] title: CZ Calls $1.8B FTX Lawsuit Nonsensical, Says U.S. Court No Jurisdiction (https://coingape.com/cz-calls-1-8b-ftx-lawsuit-nonsensical-us-court-no-jurisdiction/)

[3] title: Zhao Seeks Dismissal of FTX 1.8B Lawsuit Over Jurisdiction and Fraud Claims (https://www.ainvest.com/news/zhao-seeks-dismissal-ftx-1-8b-lawsuit-jurisdiction-fraud-claims-2508/)

[4] title: CZ Asks Court to Dismiss $1.76B Clawback Lawsuit Filed by FTX (https://cryptonews.com/news/cz-asks-court-to-dismiss-1-76b-clawback-lawsuit-filed-by-ftx/)

[5] title: CZ Asks US Bankruptcy Court to Invalidate FTX’s $1.76 Billion Lawsuit (https://cryptorank.io/news/tag/binance)

[6] title: BREAKING: CZ Seeks Dismissal of $1.8B FTX Lawsuit (https://www.binance.com/en/square/post/27935483714730)