FTX is demanding $1.76 billion from Binance, accusing CZ and his former colleagues of wrongly profiting from a share sale in 2021, shortly before FTX’s downfall.
Legal Battle in Double-Digits
$1.76 billion. That’s the amount the FTX bankruptcy team is demanding from Binance. The issue: a four-year-old deal that became explosive in the context of Sam Bankman-Fried’s dramatic fall.
However, Changpeng Zhao, also known as CZ, is not backing down. The former head of Binance has formally requested the dismissal of the lawsuit in US courts, claiming that the Delaware courts simply do not have jurisdiction to rule, as he is a resident of the Emirates.
Out of Reach?
Based in the United Arab Emirates for several years, CZ is leveraging his foreign residency to challenge the territorial competence of the court. Another major argument: the cross-border nature of the transactions. According to his lawyers, US bankruptcy laws cannot apply to operations conducted outside US soil.
Plaintiffs want to stretch the law beyond its natural limits.
CZ is not alone. Two other former Binance executives, Samuel Lim and Dinghua Xiao, have also filed similar requests in July to dismiss their involvement.
A Case of Tokens and Power
At the heart of the dispute: an operation dating back to July 2021. At that time, Binance sold its 20% stake in FTX in exchange for cryptocurrencies, including the FTT token. A transaction concluded while the two platforms were still ‘partners’, according to CZ.
But for FTX liquidators, this sale would have been orchestrated to the detriment of the creditors of the now bankrupt platform. They claim that Binance and its former executives would have received funds improperly, taking advantage of their then-majority shareholder position, including 18.4% of FTX US.
A Risky Maneuver for FTX?
This new legal offensive is part of an aggressive strategy by the liquidators to recoup maximum funds. But by targeting CZ, who himself served four months in prison for anti-money laundering violations, they are challenging one of the most influential veterans in the industry.
‘Blaming Mr. Zhao for SBF’s crimes makes no sense,’ declares the defense.
Remember, Sam Bankman-Fried is currently serving a 25-year prison sentence for massive fraud. On the other hand, CZ is trying to move on. But this case could plunge him back into the intricacies of an ecosystem he helped build, only to see it crumble.
