CZ seeks dismissal of FTX’s $1.76B clawback lawsuit in Delaware

Changpeng “CZ” Zhao has asked a U.S. bankruptcy court to dismiss FTX’s $1.76 billion clawback lawsuit, claiming the court lacks jurisdiction over a foreign resident involved in offshore transactions. 

The request was filed on Aug 4 in the Delaware bankruptcy court, according to a report by Bloomberg Law. The lawsuit centers on a July 2021 share repurchase deal between FTX and Binance, in which FTX allegedly sent $1.76 billion, via Alameda Research, to buy back equity from Binance. 

FTX’s bankruptcy estate claims the transaction was improper and is seeking to recover the funds under U.S. bankruptcy law. Zhao argues that the deal was conducted entirely through foreign entities, including firms in the British Virgin Islands, Ireland, and the Cayman Islands, placing it outside the reach of U.S. statutes.

Jurisdictional challenge and defense

Zhao’s legal team said he lives in the United Arab Emirates and has no meaningful ties to Delaware or the United States. The motion claims that U.S. bankruptcy law doesn’t apply to the alleged transfers, which were not domestic, and that serving U.S. legal counsel on a foreign party is not sufficient under the law.

Zhao described himself as a “nominal counterparty” in the transaction and said the complaint attempts to unfairly hold him responsible for FTX’s internal failures. Two former Binance executives named in the same case, Samuel Wenjun Lim and Dinghua Xiao, also filed to be removed from the suit last month.

FTX collapse legal battles

This is one of several legal confrontations to arise from FTX’s 2022 collapse. FTX’s bankruptcy estate sued Binance and Zhao in 2024, seeking to recover funds and alleging reputational harm.

CZ himself has faced legal troubles, pleading guilty to U.S. anti-money laundering violations and serving a four-month sentence, while Sam Bankman-Fried is serving 25 years for fraud.