Key takeaways:
- Binance founder Changpeng Zhao (CZ) is seeking dismissal of a $1.76 billion lawsuit filed by FTX, calling the claims legally flawed and outside U.S. jurisdiction.
- Zhao argues the case has no ties to Delaware or the United States, and says the disputed transactions occurred entirely between foreign entities.
- His legal team invokes the “safe harbor” rule in bankruptcy law, protecting certain financial transfers from clawback.
- Zhao denies any personal receipt of funds and says the 2021 deal was a routine business exit, not a fraud.
- Zhao disputes allegations tied to his 2022 tweets and brief acquisition talks, calling them fact-based and abandoned after due diligence.
- Zhao argues that Bahamian law should apply, since FTX Digital Markets was based there and the alleged harm occurred offshore.
Binance founder, Changpeng Zhao (CZ), asked a U.S. bankruptcy court on Monday to dismiss a $1.76 billion lawsuit brought by FTX, calling the claims legally unfounded and outside the court’s jurisdiction.
In a motion filed in the U.S. Bankruptcy Court for the District of Delaware, Zhao argued that the law suit, stemming from his cryptocurrency exchange’s short-lived business relationship with FTX, should be dismissed on multiple grounds, including improper service, lack of personal jurisdiction, an attempt to apply U.S. law to foreign transactions, and failure to state a valid claim under federal or state statutes.
“Plaintiffs nonsensically blame Mr. Zhao and others for Mr. Bankman-Fried’s failings,” the filing said, referring to FTX’s founder Sam Bankman-Fried, who is currently serving a 25-year prison sentence for fraud.
Former Partners Turned Rivals
FTX and Binance were briefly partners in 2019, when Binance acquired a roughly 20% equity stake in FTX Trading Ltd.
That relationship ended in July 2021 when Binance sold back its stake in exchange for a mix of cryptocurrency, including FTX’s native token FTT.
Over a year later, in November 2022, Zhao tweeted that Binance was liquidating its remaining FTT holdings, citing “recent revelations” about FTX’s financial health. The move triggered a wave of withdrawals from FTX, which soon filed for bankruptcy.
The lawsuit filed by FTX alleges that Binance’s 2021 exit and Zhao’s public statements contributed to its collapse and seeks to recover $1.76 billion in allegedly fraudulent transfers and damages for misrepresentation.
Jurisdiction and Service Disputed
In the filing, Zhao, who resides in the United Arab Emirates, said he was not properly served with the lawsuit. His lawyers argued that delivering court documents through U.S.-based counsel does not satisfy the rules for serving individuals overseas, as required under Rule 4(f) of the Federal Rules of Civil Procedure.
Zhao also challenged the court’s authority to hear the case, saying the complaint does not link him to any conduct in Delaware or elsewhere in the United States.
With no personal or business presence in the country, Zhao said the court cannot exercise jurisdiction over him.
Safe Harbor Defense
Zhao’s legal team argued that some of the claims against him should be dismissed under a section of U.S. bankruptcy law known as the “safe harbor” rule, which protects certain financial transactions from being reversed in bankruptcy cases.
According to the filing, the 2021 deal between FTX and Binance involved a type of contract that qualifies for protection, and one of the parties, Alameda Research, met the legal definition of a “financial participant.”
The motion states that Alameda held “more than six times” the required asset threshold, which it says is backed by FTX’s own bankruptcy filings. Because of this, Zhao’s lawyers say the claims related to that transaction “should be dismissed.”
No Fraud, No Receipt of Funds
In the filing, Zhao also pushed back on allegations of fraud, stating he never personally received any of the disputed cryptocurrency and that the transfer was between foreign companies, not individuals. His lawyers described him as a “nominal counterparty” in the transaction, emphasizing that the crypto was sent to Binance entities, not to Zhao himself.
The filing describes the 2021 purchase as a legitimate business decision between two companies that could no longer work together. It says the transfer was publicly known and structured as a typical business separation.
Additionally, the motion argues that FTX failed to show that the company was insolvent at the time or that the value exchanged was unfair.
Zhao Rejects Social Media Allegations
The filing also addresses claims that Zhao’s tweets in November 2022 contributed to FTX’s collapse by triggering a surge in customer withdrawals. His legal team said the posts were accurate, issued in real time, and reflected Binance’s response to mounting concerns about FTX’s financial condition.
Additionally, FTX alleged in the lawsuit that Binance engaged in brief acquisition talks in bad faith. However, Zhao’s motion disputes that claim, citing a nonbinding letter of intent and saying Binance withdrew only after due diligence raised concerns.
Zhao’s motion also cites arguments raised by other Binance defendants, who argue that claims based on public statements and unconsummated deals fall outside the scope of bankruptcy proceedings.
Applicable Law Disputed
In the motion, Zhao’s legal team argues that the case should be governed by the laws of The Bahamas, where FTX Digital Markets was based and where the alleged harm took place, since there is no relevant conduct connecting the matter to Delaware or the United States.
Motion Wrap-Up: Zhao Seeks Dismissal on Legal and Jurisdictional Grounds
The motion argues that the claims are legally unsupported, improperly served, and tied to offshore transactions beyond the reach of U.S. courts.
Zhao’s legal team also denies any personal wrongdoing or intent to harm FTX and contends that the court lacks authority to hear the case.
The filing seeks full dismissal of all claims, in line with motions submitted by other Binance-linked defendants.
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