Changpeng Zhao (CZ), the co-founder and former CEO of Binance, is pushing back against a $1.76 billion lawsuit filed by the FTX estate. The legal clash, playing out in a Delaware bankruptcy court, centres on a 2021 share repurchase deal between Binance and FTX. CZ’s legal team argues that the case lacks merit and jurisdiction, calling it “nonsensical.”

CZ Challenges U.S. Court’s Jurisdiction

In a motion filed on Monday, CZ urged the U.S. Bankruptcy Court in Delaware to dismiss the lawsuit on the grounds of jurisdiction. CZ, who now lives in the United Arab Emirates (UAE), argues he is not “at home” in Delaware and shouldn’t be subjected to litigation there.

The core of CZ’s argument lies in the fact that the transactions under scrutiny were carried out by offshore entities. These include companies registered in the British Virgin Islands, Ireland, and the Cayman Islands. Therefore, he contends, U.S. bankruptcy laws shouldn’t apply to these transactions.

What Is the Lawsuit About?

The case is tied to a share repurchase agreement from 2021. FTX, then led by Sam Bankman-Fried, bought back Binance’s 20% stake in the company. According to the FTX estate, this transaction involved improperly transferred funds from Alameda Research, a sister company to FTX and a central player in the platform’s collapse.

The FTX trust argues that Binance and its executives should return the funds, claiming the deal was part of a broader pattern of fraud. CZ, however, denies any wrongdoing. He argues Binance was merely a “nominal counterparty” and not involved in any fraudulent activities.

Furthermore, CZ says that the FTX estate is trying to shift blame for Bankman-Fried’s alleged misconduct onto Binance and its leadership team.

Other Binance Executives Also Seek Dismissal

CZ is not the only Binance-linked figure seeking to distance themselves from the case. In July, former Binance executives Samuel Wenjun Lim and Dinghua Xiao also filed motions to dismiss similar claims. Their legal teams echoed CZ’s argument that the transactions were extraterritorial and fall outside U.S. jurisdiction.

The FTX trust claims the Binance team benefited from Alameda’s misused funds. However, CZ and others insist the transactions were legitimate and unrelated to FTX’s internal issues or eventual collapse.

Legal Arguments Focus on Procedure and Jurisdiction

In addition to the jurisdictional dispute, CZ’s lawyers raised several legal and procedural points:

• Improper Service: They argue that serving U.S.-based legal counsel for a foreign defendant (CZ) is not legally valid, making the entire complaint procedurally flawed.
• Securities Law Defence: The team also states that U.S. safe harbour provisions for securities contracts do not apply in this case and should not be extended to cross-border deals.
• Constructive Fraud Claims: The motion claims the fraud allegations lack sufficient legal grounding and fail to meet the required standards.

These arguments are aimed at getting the case thrown out before it progresses further.

The Case Continues

Despite CZ’s efforts, the lawsuit FTX Digital Markets Ltd. vs. Binance Holdings Ltd. is still active in the U.S. Bankruptcy Court for the District of Delaware. The court will now have to determine whether the case has enough jurisdictional standing to move forward.

This legal battle is part of a broader wave of litigation stemming from FTX’s collapse in late 2022, which triggered a chain reaction across the crypto world. As regulators and trustees seek to recover billions for creditors, more crypto firms and executives may find themselves drawn into complex cross-border legal disputes.

CZ’s latest move to dismiss the $1.76 billion clawback case highlights a key challenge in crypto litigation: the global and decentralised nature of transactions. With companies incorporated across multiple jurisdictions and key individuals living abroad, courts must navigate a maze of legal and procedural questions.