Binance co-founder Changpeng “CZ” Zhao has just fought back against the FTX bankruptcy property in Delaware Court, and said the US has no legal rights to come after him beyond the $1.76 billion clawback claim.
On Monday, he filed an motion to the court to dismiss the case completely. reason? “The claims have been removed so far as they do not apply to the law in question that lacks applications outside of Delaware and even out-territorial territory,” CZ wrote in the filing.
He lives in the United Arab Emirates, not the United States, and his lawyers argue that being a foreign citizen will prevent him from being touched by the US Bankruptcy Court. “The Trust and FTX Digital Markets Ltd. cannot assert the fact that Zhao is “at home” under Delaware’s jurisdiction,” the motion states.
The lawsuit is part of FTX’s efforts to pull back cash that was inappropriately moved by Sambankman Fried prior to the collapse. CZ says that doesn’t make sense.
Binance transactions, foreign ties, and jurisdictional barriers
This case dates back to the July 2021 stock buyback transaction between FTX and Binance. In November 2024, FTX Trust sued Binance, CZ and several others over that transaction, accusing them of benefiting from transfers that would never have happened.
According to The Trust, Binance and its executives earned money by selling about 20% of FTX’s global units and 18.4% of the US division. The money for that transaction came from Alameda Ltd, based in the Virgin Islands in the UK.
CZ does not deny that the transaction has happened. What he claims is that it was all offshore. That’s important. Binance’s corporations are incorporated into Ireland, the Cayman Islands and BVI, which has led to money moving in and out of jurisdictions that are not met by US law. His movement states that this whole thing is “out of territory.” This means that Delaware laws do not apply.
“Trust and FTX Digital Market was not responsible for Zhao, Binance and Binance,” Filing said. And CZ added that he is nothing more than a “nominal counterparty” in the transaction. In other words, he wasn’t even the main party behind the deal.
Two former Vinanence executives named in the same lawsuit, Samuel Wenjun Lim and Dinghua Xiao also urged the court in July to cut them from the lawsuit. They call it stretch too.
The submission also points out that Binance and FTX are just “temporary business partners.” According to CZ, Binance once held a 20% stake in FTX, but things quickly ended after “personal complaints.” That fairness was exchanged for cryptography and they left.
Additionally, CZ’s lawyers say the entire lawsuit is flawed because serving a US lawyer on foreign defendants is not valid under the bankruptcy law. The motion says it will automatically kill complaints. It also points out that the US Bankruptcy Act does not explicitly cover foreign transfers, particularly when transactions are related to securities agreements that fall under safe port protection.
“The constructive fraud claims do not meet the legal requirements under the Safe Harbor provisions,” the motion added. Under federal law, Safe Harbor allows “qualified transactions” that include securities to be protected from clawback.
Currently, both sides are coming to court in major criminal baggage. CZ was already in prison for four months for violating US money laundering laws. Meanwhile, Sam Bankmanfried has been in 25 years with fraud, conspiracy and five other charges. That context makes this battle even more troublesome.
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