Changpeng Zhao Moves to Dismiss $1.76B FTX Lawsuit, Citing Lack of U.S. Jurisdiction

Background: The $1.76 Billion FTX Lawsuit

The lawsuit stems from a July 2021 equity repurchase deal, where FTX bought back Binance’s 20% stake in the exchange. According to the complaint, FTX—led by Sam Bankman‑Fried—used a combination of FTX‑issued FTT tokens and Binance’s BUSD stablecoin to finance the buyback. The FTX bankruptcy estate, now overseen by a restructuring team, claims the transaction was fraudulent and seeks to recover the $1.76 billion to repay creditors affected by FTX’s collapse in 2022.

FTX’s legal team alleges the assets used in the buyback were misappropriated from customer deposits. Testimony from Caroline Ellison, former CEO of Alameda Research, during Bankman‑Fried’s trial suggested that Alameda borrowed over $1 billion from customer funds to complete the deal.

Zhao’s Defense: No Direct Receipt of Funds

Zhao’s legal team argues that he was not the recipient of the disputed funds. “Plaintiffs in fact show that Mr. Zhao was not a transferee,” the motion notes, asserting he was merely a nominal counterparty in the transaction and a nominal signatory, not the actual beneficiary of the assets transferred.

The Lawsuit’s Broader Allegations

Beyond the buyback, the FTX estate accuses Zhao of contributing to FTX’s downfall. A November 2022 tweet from Zhao—announcing Binance’s decision to liquidate its FTT holdings—triggered a wave of withdrawals from FTX, leading to a liquidity crisis that preceded its bankruptcy.

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FTX founder Sam Bankman‑Fried was sentenced in March 2024 to 25 years in prison for fraud, conspiracy, and money laundering. Zhao himself served a four‑month sentence in the U.S. in 2024 after pleading guilty to anti‑money laundering violations as part of a $4.3 billion settlement with U.S. regulators. His resignation as Binance CEO was part of the settlement terms.

This legal battle marks the latest clash between two of crypto’s most high‑profile figures, as Binance and the FTX bankruptcy estate continue to dispute the 2021 buyback and its role in the chain of events that led to FTX’s historic collapse.