Crypto Executive Zhao Files Motion to Dismiss $1.8 Billion FTX Lawsuit
| Bloomberg
In Brief
- Binance founder Changpeng Zhao has filed to dismiss a $1.8 billion lawsuit brought by the FTX bankruptcy estate.
- The case concerns a 2021 equity buyback FTX arranged with Binance, allegedly using misappropriated funds.
- Zhao argues he was improperly served and is not subject to Delaware jurisdiction.
The founder and former CEO of cryptocurrency exchange Binance, Changpeng Zhao, has filed a motion to dismiss a $1.76 billion lawsuit brought against him and the exchange by the FTX bankruptcy estate.
Zhao’s lawyers argue U.S. courts lack jurisdiction over him, asserting he was improperly served. The motion, submitted Monday to the Delaware Bankruptcy Court, contends the legal complaint fails on multiple technical grounds.
Zhao, who lists his residence as the United Arab Emirates, claims the lawsuit violated procedural norms regarding service and that Delaware courts have no personal jurisdiction due to minimal ties to the state.
“Mr. Zhao is not amenable to suit in this forum, and the statutes Plaintiffs seek to enforce do not reach the extraterritorial transactions described in the Complaint.”
The filing also asserts the claims are legally unfounded and “outright incoherent,” notes Zhao joins other Binance executives filing similar dismissal motions.
The FTX Lawsuit
Zhao is attempting to fend off a lawsuit filed by FTX Digital Markets Ltd. and the FTX Trading estate seeking $1.76 billion worth of crypto assets transferred by Binance in July 2021.
The transaction involved FTX buying back a 20% stake Binance held, but was allegedly funded with tokens and assets deemed misappropriated from customer deposits according to the suit.
The FTX estate argues the transfer was fraudulent, seeking asset recovery to aid creditor repayment following FTX’s 2022 collapse. Zhao’s legal team counters that he wasn’t a direct recipient, merely “a nominal counterparty.”
“Plaintiffs in fact show that Mr. Zhao was not a transferee. They allege he was merely a nominal counterparty in the transfer of BUSD from Alameda LTD to Binance.”
FTX and Binance
The lawsuit extends beyond the buyback, citing Zhao’s role in FTX’s collapse, particularly a November 2022 tweet triggering significant customer withdrawals.
Federal prosecutors argue FTX and its affiliate Alameda Research were insolvent before the buyback, necessitating customer funds to finance the transaction.
