Changpeng “CZ” Zhao, co-founder and former CEO of Binance, is pushing back against a $1.76 billion clawback lawsuit filed by the FTX bankruptcy estate, arguing that the U.S. courts lack jurisdiction over him and the cross-border transactions at the heart of the case.
In a legal motion filed Monday in Delaware, Zhao’s legal team requested that the claims be dismissed, stating that Zhao resides in the United Arab Emirates and is therefore beyond the reach of Delaware’s jurisdiction. The motion also argued that the transactions cited by FTX occurred internationally and are not subject to U.S. bankruptcy law, which Zhao’s team said should not be applied extraterritorially.
“Plaintiffs’ fraudulent transfer claims improperly demand the extension of bankruptcy law abroad,” the filing reads.
Background: FTX Seeks to Reclaim Funds from Binance Deal
The lawsuit stems from a July 2021 equity buyback deal between Binance and FTX founder Sam Bankman-Fried, who has since been convicted and sentenced to 25 years in prison for fraud and conspiracy.
FTX's estate claims that Binance and its executives received funds improperly during the transaction, which saw Binance sell back approximately 20% of FTX’s global business and 18.4% of its U.S. arm in exchange for crypto assets, including FTX's native token, FTT.
Zhao contends that Binance and FTX were briefly partners, but later severed ties and conducted a standard equity redemption. The filing emphasized that Zhao should not be held liable for the fallout from Bankman-Fried’s mismanagement of FTX.
“Plaintiffs nonsensically blame Mr. Zhao and others for Mr. Bankman-Fried’s failings,” the document states.
Others Challenge Court Reach
Zhao is not alone in contesting the lawsuit. Two other Binance-linked executives—Samuel Wenjun Lim and Dinghua Xiao—filed similar motions in July, challenging the Delaware court’s jurisdiction.
The legal dispute is part of a broader effort by FTX’s bankruptcy administrators to recover billions of dollars in assets for creditors after the company’s dramatic collapse in 2022.
Global Implications for Crypto Legal Battles
The case underscores the legal complexities of the global crypto ecosystem, where deals often span borders but may still fall under U.S. legal scrutiny when companies collapse. Jurisdiction, corporate structure, and the classification of crypto transactions remain central issues in untangling the aftermath of failed platforms like FTX.
Zhao, who recently completed a four-month prison sentence in the U.S. for anti-money laundering violations, is now seeking to shield himself from further legal exposure in a case that could have ripple effects on how courts handle cross-border crypto disputes.
