Changpeng Zhao Filed a Motion to Dismiss FTX's $1.76 Billion Lawsuit
Changpeng Zhao (CZ), the founder and former CEO of Binance, has filed a request with the court to dismiss the $1.76 billion compensation lawsuit initiated by the FTX bankruptcy board. In Zhao's defense, it was emphasized that his residency in the United Arab Emirates was not sufficient for the Delaware court to establish jurisdiction over him.
The Case is Based on the Share Buyback Agreement from 2021
The lawsuit in question focuses on the cryptocurrency transfers made during the share buyback process from Binance by FTX in July 2021. FTX's bankruptcy board alleges that Zhao and Binance improperly held approximately $1.76 billion worth of crypto assets during this process and claims that these transfers were 'fraudulent'.
According to allegations, Binance received a significant amount of crypto assets while selling back 20% of FTX's global operations and 18.4% of its American subsidiary FTX US. FTX's lawyers argue that these transfers are subject to U.S. securities laws and that the transactions were conducted illegally.
Zhao: 'U.S. Courts Exceed Their Jurisdiction'
Zhao's defense stated that U.S. bankruptcy laws cannot extend beyond international jurisdiction limits. The lawsuit documents included statements such as, 'The plaintiffs are exceeding their jurisdiction by attempting to export U.S. bankruptcy law abroad.'
Zhao also emphasized that the transactions have a cross-border nature, thus the Delaware court does not have personal jurisdiction in this matter.
Similar Objections Have Come from Other Executives
These jurisdictional debates had also arisen for other defendants in the case. Binance executives Samuel Wenjun Lim and Dinghua Xiao argued in their court filing in July that the case was unconstitutional and stated that U.S. laws could not be applicable in international contexts.
What Will Happen?
The court is expected to evaluate whether the case exceeds the limits of U.S. bankruptcy laws and whether Delaware jurisdiction is valid. If the court accepts Zhao's objection, the case could be entirely dismissed or transferred to another jurisdiction.