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Changpeng Zhao argues FTX’s claims do not apply outside U.S. jurisdiction and lack merit.
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FTX’s lawsuit alleges Binance improperly received funds in a 2021 equity deal.
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Zhao contests the lawsuit’s service method, claiming improper procedure.
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FTX seeks to recover funds after its collapse, targeting Binance and other entities.
Changpeng Zhao, the co-founder and former CEO of Binance, has filed a motion to dismiss a $1.76 billion lawsuit brought by the FTX bankruptcy estate. The suit seeks to recover funds related to a 2021 share buyback agreement between Binance and FTX. In his filing, Zhao contends that the lawsuit does not belong in Delaware and that U.S. jurisdiction does not apply to this case.
Zhao’s legal team argues that the court lacks jurisdiction over him due to his residency in the UAE. Additionally, Zhao insists that the relevant transactions in the case were international in nature, and thus U.S. statutes cannot be applied extraterritorially.
Changpeng Zhao Legal Argument Against U.S. Jurisdiction
Changpeng Zhao legal filing centers on the argument that the U.S. court has no authority over this case. In the motion filed on August 4, Zhao points out that the transactions in question involved Binance entities located outside of the U.S. and were not directly related to Delaware, where the lawsuit is being heard.
“The claims are so far removed from Delaware, and even the United States, that the statutes at issue do not even apply,” Zhao stated. He further explained that the legal claims related to fraudulent transfers are being wrongly extended across borders by FTX.
Zhao’s argument reflects broader concerns about the application of U.S. law to global transactions involving international parties. The case has seen other Binance-affiliated individuals file similar motions in recent weeks, challenging the scope of the court’s jurisdiction.
Background of the Dispute Between Binance and FTX
The lawsuit arises from a 2021 agreement between Binance and FTX involving a share repurchase arrangement. FTX Trust, part of FTX’s bankruptcy estate, alleges that the buyback deal was improperly funded by Alameda Research, an affiliate of FTX. The estate also accuses Binance executives, including Zhao, of receiving improper funds that destabilized FTX.
The filing also highlights allegations that Binance’s negative statements about FTX’s digital assets, along with tweets from Changpeng Zhao, contributed to the collapse of the exchange. In response, Zhao stated that the accusations of destabilizing FTX were baseless, noting that Binance and FTX ended their business relationship before the firm’s collapse.
“Plaintiffs nonsensically blame Mr. Zhao and others for Mr. Bankman-Fried’s failings,” the motion read. Changpeng Zhao legal team argues that FTX is attempting to shift the blame for its collapse onto Binance and its leadership.
FTX Bankruptcy Estate and its Recovery Efforts
FTX’s bankruptcy estate has been actively seeking to recover assets lost during the company’s fall, targeting various entities and individuals. As part of its efforts, FTX has filed lawsuits against multiple parties, including Binance, other crypto firms, and former associates of Sam Bankman-Fried.
The estate aims to recover funds that it claims were improperly moved or diverted before FTX’s bankruptcy filing. This includes the $1.76 billion allegedly transferred between Binance and FTX entities in the 2021 buyback deal. FTX has also sought legal action against other organizations such as Crypto.com, Bybit, and KuCoin in its efforts to recoup lost assets.
FTX’s creditors are set to receive their third round of repayments starting in late September, with FTX estimating $1.9 billion to be distributed to eligible creditors. These efforts are part of a broader strategy to resolve claims and recover funds following FTX’s dramatic collapse in late 2022.
Zhao’s request to dismiss the lawsuit adds another layer of complexity to the ongoing legal battles surrounding FTX’s bankruptcy proceedings. While FTX seeks to recover significant funds, the challenge of jurisdiction and legal procedure may delay the resolution of these disputes.
