Essential Insights
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Dismissal Motion Filed: Changpeng Zhao (CZ) has filed a motion to dismiss a $1.76 billion lawsuit from the FTX bankruptcy trust, asserting that the U.S. court lacks jurisdiction over him since he resides in the UAE.
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Legal Argument: CZ’s legal team argues that the accusations are extraterritorial, claiming they don’t fall under U.S. bankruptcy laws as the transactions involved were conducted outside American jurisdiction.
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Nature of FTX Relationship: The lawsuit revolves around a 2021 deal where Binance sold its equity in FTX. CZ contends that the partnership was temporary and ended due to personal disagreements, distancing Binance from FTX’s collapse.
- Response from Former Executives: Former Binance executives named in the lawsuit are also filing motions to dismiss, echoing CZ’s claims. The legal battle comes amid ongoing creditor claim distributions from the defunct exchange.
CZ Moves to Dismiss FTX’s $1.8B Lawsuit
Changpeng Zhao, known as CZ, has filed a motion to dismiss a $1.76 billion lawsuit from the FTX bankruptcy trust. He argues that the U.S. court lacks jurisdiction due to his residence in the United Arab Emirates.
His legal team made this argument in the U.S. Bankruptcy Court for the District of Delaware on Monday. They believe the lawsuit’s claims do not apply because the events occurred outside the United States. According to Bloomberg, they stated, “The claims are so far removed from Delaware and even the United States that the statutes at issue do not even apply.”
The lawsuit, filed in November 2024, accuses Zhao and Binance of unlawfully benefiting from funds moved by former FTX founder Sam Bankman-Fried (SBF). Specifically, the case highlights a July 2021 transaction where Binance sold its equity in both FTX’s international and U.S. divisions. Notably, Binance reportedly held a 20% stake in FTX’s global unit and 18.4% in its U.S. counterpart.
Court documents reveal that the funds in question were transferred by Alameda Ltd, a British Virgin Islands company. In contrast, Binance’s entities were registered in Ireland, the Cayman Islands, and also the British Virgin Islands. This distinction reinforces CZ’s claim that the transaction falls outside U.S. bankruptcy jurisdiction. His legal team has described him as a “nominal counterparty” in the deal, emphasizing that he was not heavily involved.
Moreover, Zhao notes that the partnership between FTX and Binance was short-lived. Personal disagreements prompted the ending of their collaboration, after which the equity swap occurred. He contends that the lawsuit inaccurately attributes FTX’s collapse to him and Binance, arguing that it stemmed from SBF’s actions.
CZ also pointed out that serving legal papers via U.S.-based lawyers lacks validity when the defendant lives abroad. His defense asserts that the trust is extending its claims beyond U.S. boundaries, unsupported by law. They argue that the fraud allegations do not meet necessary federal standards relating to securities contracts.
In addition to CZ, former Binance executives Samuel Wenjun Lim and Dinghua Xiao have also filed motions to dismiss their involvement in the case. This comes after CZ served a four-month sentence last year for anti-money-laundering violations. Meanwhile, SBF is currently serving 25 years for fraud and conspiracy.
On a different note, the defunct FTX exchange announced plans to distribute its next round of creditor claims on September 30. As of August 2025, the exchange has returned around $6.2 billion to former customers in two significant rounds.
The outcome of this legal battle could have implications for cryptocurrency regulation and technology development, especially considering the evolving landscape of digital currencies.
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