CZ Seeks Dismissal of $1.76B FTX Clawback Lawsuit in Delaware
Changpeng “CZ” Zhao has petitioned a U.S. bankruptcy court to dismiss FTX’s $1.76 billion clawback lawsuit, contending that the court lacks jurisdiction over a foreign entity involved in offshore dealings.
Summary
- CZ is requesting the dismissal of FTX’s $1.76B clawback lawsuit on jurisdictional grounds.
- The disputed 2021 share deal includes offshore entities and international transactions.
- The motion claims that U.S. bankruptcy law is not applicable; a ruling is still awaited.
The request was filed on August 4 in the Delaware bankruptcy court, as reported by Bloomberg Law. This lawsuit pertains to a July 2021 share repurchase agreement between FTX and Binance, wherein FTX allegedly transferred $1.76 billion via Alameda Research to reacquire equity from Binance.
FTX’s bankruptcy estate argues that this transaction was improper and seeks restitution under U.S. bankruptcy legislation. Zhao asserts that the arrangement was carried out entirely through foreign entities, including firms from the British Virgin Islands, Ireland, and the Cayman Islands, thus making it outside the purview of U.S. laws.
Challenge to Jurisdiction and Defense
Zhao’s legal counsel has indicated that he resides in the United Arab Emirates and has no substantial ties to Delaware or the United States. The motion points out that U.S. bankruptcy laws do not pertain to the alleged transfers, which were not domestic, and that serving U.S. legal documents to a foreign party does not fulfill legal requirements.
Zhao described himself as a “nominal counterparty” in the transaction, claiming that the complaint unfairly attempts to hold him liable for FTX’s internal troubles. Two former Binance executives, Samuel Wenjun Lim and Dinghua Xiao, who are also named in the lawsuit, sought to have their cases dismissed last month.
Legal Disputes Following FTX’s Collapse
This case is one of several legal battles resulting from FTX’s fall in 2022. FTX’s bankruptcy estate filed a lawsuit against Binance and Zhao in 2024, aiming to recover funds and alleging reputational damages.
Zhao has faced his own legal challenges, having previously pleaded guilty to U.S. anti-money laundering violations and serving a four-month term, while Sam Bankman-Fried is currently serving a 25-year sentence for fraud.
