“I’m a Foreign Citizen”: CZ Fights Back Against $1.76 Billion FTX Clawback Case

Binance founder Changpeng “CZ” Zhao is pushing to have a $1.76 billion clawback lawsuit filed by the FTX bankruptcy estate dismissed, arguing U.S. courts have no authority to hear the case against him.

In a motion submitted to a Delaware court, Zhao’s legal team claims the case has no connection to the United States. They argue that all parties and assets involved in the dispute are based offshore. The litigation stems from a share buyback arrangement between FTX and Binance that took place back in July 2021.

Related: “I Wonder”: CZ Speculates on FTX’s Possible Role in LUNA Collapse

The Argument: A Purely Offshore Dispute

According to court filings, FTX and its affiliates claim that Zhao and Binance improperly benefited from the sale of their stake in FTX. The funds for this buyback reportedly came from Alameda Ltd., an entity based in the British Virgin Islands.

Binance’s lawyers counter that the corporate entities involved are based in Ireland, the Cayman Islands, and the British Virgin Islands. They also stress that the transaction was settled using cryptocurrency, specifically Binance USD (BUSD) and FTX Token (FTT), not US dollars.

Zhao’s motion highlights his residency in the United Arab Emirates and his status as a foreign citizen, arguing that U.S. bankruptcy laws do not have extraterritorial reach. The filing alleges that the FTX estate has not proven that Zhao was “at home” in Delaware or that he personally received or controlled the assets in question.

His legal team further stated that Zhao was merely a “nominal counterparty” to the deal, not the actual recipient of the funds.

Did CZ’s Tweets Cause the Collapse?

The FTX estate has also pointed to Zhao’s social media activity as a factor in the company’s collapse, specifically referencing his 2022 posts about Binance’s FTT holdings and potential acquisition talks. However, Zhao’s attorneys responded that FTX was already in a state of insolvency long before any of his social media posts.

This civil lawsuit runs parallel to the criminal charges both former CEOs have faced. Zhao recently served a four-month prison term for money laundering violations, while former FTX CEO Sam Bankman-Fried is currently appealing a 25-year sentence for fraud and conspiracy.

Related: Chinese Creditors Challenge $1.4B Exclusion from FTX Bankruptcy Claims

Additionally, two other former Binance executives, Samuel Wenjun Lim and Dinghua Xiao, have also filed motions seeking dismissal of related claims against them.