Changpeng Zhao Asks To Toss $1.8B FTX Clawback Suit

Former Binance CEO Changpeng Zhao requested the courtroom to dismiss a lawsuit by FTX that seeks to recuperate virtually $1.8 billion from a deal between Binance and FTX, which the defunct change claims was fraudulently transferred.

Zhao informed a Delaware chapter courtroom that the go well with appears to be like to “nonsensically blame” him for the actions of Sam Bankman-Fried, FTX’s founder, who was jailed for 25 years after a high-profile fraud trial.

Zhao, a resident of the United Arab Emirates, argued that the go well with’s claims “are to this point eliminated” from the US that “the statutes at concern, which lack extraterritorial software, don’t even apply.”

FTX sued Zhao, Binance and different then-executives in November, claiming that FTX fraudulently transferred round $1.8 billion in crypto to Binance in 2021 to purchase again shares that the change had bought.

FTX, now beneath the management of a crew of attorneys trying to maximize creditor returns, stated the change and Bankman-Fried knew it couldn’t bankroll the share repurchase, so that they used buyer funds to get the deal accomplished.

Zhao says he wasn’t a part of the transfers

Zhao argued that “each pertinent half” of the share repurchase deal occurred outdoors the US, because the Binance entities concerned are based mostly in Eire, the Cayman Islands, and the British Virgin Islands (BVI), whereas the FTX-linked agency, Alameda Ltd, was additionally based mostly within the BVI.

He added that the deal used cryptocurrency, specifically Binance USD (BUSD), a stablecoin created by the change, and FTX Token (FTT), which was created by FTX. 

“Plaintiffs don’t allege that Mr. Zhao acquired or possessed dominion over the exchanged cryptocurrency,” his attorneys argued.

They added that Zhao “was not a transferee” however was “merely a ‘nominal counterparty’ within the switch.”

Posts didn’t add to FTX downfall, says Zhao

Zhao additionally argued that his X posts relating to FTX and Binance’s sale of FTT tokens didn’t contribute to the crypto change’s collapse, as the corporate has stated.

After CoinDesk reported in November 2022 that FTX’s holdings had been largely made up of FTT, Zhao posted to X that Binance was promoting its FTT holdings. 

FTX claimed this was a calculated try and spark buyer withdrawals and sink the corporate.

Zhao additionally posted to X that Binance would look to purchase FTX and canopy its shortfall, however shortly bailed out of shopping for the agency.

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Zhao stated in his movement that his posts didn’t add to a run on FTX and its collapse as a result of the corporate “was a fraudulent enterprise.”

“Even when Mr. Zhao’s social media posts contributed to the timing of the FTX downfall, FTX had no proper to exist and positively no proper to persist in fraud indefinitely,” his attorneys argued.

“To maintain Mr. Zhao accountable for FTX’s implosion could be no completely different than holding a whistleblower accountable for the Ponzi scheme she uncovered, on the idea that her publicity brought about ‘the proverbial run on the financial institution,’” they stated. 

Binance additionally sought dismissal

In Could, Binance sought to dismiss FTX’s lawsuit, arguing it was “legally poor,” and that FTX’s collapse was solely as a result of it was “probably the most huge company frauds in historical past.” 

FTX additionally sued two former Binance executives, ex-chief compliance officer Samuel Wenjun Lim and Dinghua Xiao, who labored in numerous roles. Each requested the courtroom final month to dismiss the go well with.

Zhao served 4 months in jail final 12 months after pleading responsible to cash laundering. Bankman-Fried was sentenced to 25 years in jail in March 2024 for his function in FTX’s fraud. He has appealed the conviction and a listening to is about for November.

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