Changpeng “CZ” Zhao is asking a U.S. bankruptcy court to throw out FTX’s $1.76 billion clawback lawsuit arguing that the case doesn’t even belong in an American courtroom.
The request was filed on August 4 in Delaware’s bankruptcy court, according to Bloomberg Law. At the heart of the dispute is a 2021 share repurchase deal where FTX, through Alameda Research, paid Binance $1.76 billion to buy back equity. FTX’s bankruptcy estate claims the deal was improper and is trying to recover the money under U.S. bankruptcy laws.
But CZ says: Not so fast.
Offshore Deal, Foreign Parties So Why U.S. Law?
Zhao’s legal team is making a straightforward argument: this was a deal between foreign entities, carried out entirely offshore. The share repurchase reportedly involved firms in the British Virgin Islands, Ireland, and the Cayman Islands and CZ himself lives in the United Arab Emirates. He has, his lawyers argue, no meaningful ties to Delaware or even the U.S..
The motion also emphasizes that U.S. bankruptcy law shouldn’t apply to transactions that never touched U.S. soil. Serving legal papers to Zhao’s U.S.-based lawyers, they add, doesn’t magically give the court jurisdiction over a foreign national.
CZ: “I’m Just a Nominal Counterparty”
Zhao described his role in the 2021 deal as limited, calling himself a “nominal counterparty.” In his view, the lawsuit is just an attempt to pin the blame for FTX’s collapse on outsiders rather than acknowledging the platform’s internal mismanagement.
This isn’t the first time someone involved in the transaction has tried to distance themselves from the legal mess. Two former Binance executives, Samuel Wenjun Lim and Dinghua Xiao, were also named in the lawsuit and they filed to be dismissed from the case last month.
One of Many Legal Fallout Cases from FTX’s Collapse
The case is just one of many legal fights playing out in the aftermath of FTX’s 2022 implosion. In 2024, FTX’s bankruptcy estate sued Binance and CZ, not just to recover funds, but also alleging that reputational damage was done.
As for CZ, this case comes on top of his own legal troubles. He recently pleaded guilty to violating U.S. anti-money laundering laws and served a four-month sentence. Meanwhile, Sam Bankman-Fried, FTX’s former CEO, is currently serving a 25-year prison term for fraud.
What’s Next?
The Delaware court has yet to rule on Zhao’s motion to dismiss. If the court agrees that it lacks jurisdiction, FTX’s estate may face an uphill battle trying to recover the $1.76 billion. If not, CZ could be pulled deeper into the legal storm surrounding one of the biggest crypto failures in history.
For now, all eyes are on how the court interprets the boundaries of U.S. bankruptcy law and whether foreign crypto deals fall inside or outside its reach.
