Changpeng Zhao Files to Dismiss FTX's Nearly $1.8 Billion Lawsuit
Binance founder Changpeng Zhao (CZ) recently filed a motion in a Delaware court to dismiss the $1.76 billion lawsuit filed by the FTX bankruptcy trust against him.
The case stems from a 2021 equity repurchase transaction between FTX and Binance, which FTX later accused of using misappropriated customer funds.
CZ's legal team raised several key defenses in the motion. First, they emphasized that Zhao, as a resident of the United Arab Emirates, lacked sufficient ties to Delaware, thus arguing that the state court lacked personal jurisdiction over him.
Second, they pointed to flaws in the service of process, arguing that his direct service of legal documents on overseas defendants violated legal procedures. More importantly, Changpeng Zhao insisted that he was merely a nominal counterparty and never actually controlled the funds.
The legal dispute dates back to July 2021, when FTX repurchased a 20% stake from Binance for approximately $1.76 billion worth of cryptocurrency (including FTT and BUSD).
FTX's bankruptcy administrator argues that the funds actually came from misappropriated customer deposits and that FTX was already insolvent at the time of the transaction.
Notably, this is Binance's second attempt to dismiss the lawsuit, having previously filed a similar motion in May 2024.
The case also involves a controversial episode: FTX alleges that Zhao Changpeng's comments on social media in November 2022 about selling FTT directly triggered a customer run and accelerated the exchange's collapse.
Changpeng Zhao's legal team countered that FTX was a "fraudulent enterprise" and that its failure stemmed from its own operational problems, not rumors of a collapse caused by an external run.
The direction of this lawsuit has attracted considerable industry attention, as it not only concerns the recovery of a massive amount of funds but also the definition of cross-border jurisdiction.
The fates of two key figures involved in the collapse of FTX differ significantly. FTX founder Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud and other charges, while Zhao Changpeng has completed a four-month prison sentence for anti-money laundering violations.
Ultimately, how the court decides this digital asset dispute, which involves complex international elements, will set an important precedent for defining similar international jurisdictions and asset ownership.
