Binance CEO Opposes Multi-billion-dollar FTX Clawback Request in Court Challenge
In a significant legal battle, Binance founder Changpeng Zhao (CZ) has filed a motion in the Delaware Bankruptcy Court seeking dismissal of a $1.76 billion clawback lawsuit initiated by the FTX bankruptcy estate. The core of Zhao's argument is that the Delaware court lacks jurisdiction over him, as he resides in the United Arab Emirates (UAE) and is a foreign national with no substantial ties to Delaware or the U.S. jurisdiction.
The lawsuit by FTX’s bankruptcy administration stems from a 2021 share buyback deal, where Binance sold its roughly 20% FTX stake. The FTX estate alleges that this transaction was financed improperly, using FTX-issued FTT tokens and Binance’s stablecoin (BUSD), amounting to an improper use of customer funds that should be clawed back to repay creditors.
Zhao, however, contests that he is a “nominal counterparty” and not personally liable for FTX’s internal problems. He also argues that the lawsuit improperly attempts to impose U.S. jurisdiction despite the offshore nature of transactions and his UAE residency. Zhao's legal team further emphasizes that the contested transactions occurred through entities based offshore—in the British Virgin Islands, Ireland, and the Cayman Islands—which further supports their position that U.S. bankruptcy law does not apply.
The FTX estate is trying to claw back funds tied to senior executives and outside parties as part of its effort to recover funds. The trust argues constructive and intentional fraud under U.S. Bankruptcy Code sections. However, Zhao counters that the claims fail legally under the relevant statutes, including safe harbor provisions protecting certain transactions.
Other former Binance executives involved have also filed motions to dismiss on similar grounds. As of early August 2025, the Delaware Bankruptcy Court has not yet ruled on Zhao’s dismissal motion, leaving the legal fight unresolved. The outcome could shape future enforcement of U.S. bankruptcy law in cross-border digital asset controversies.
It is important to note that FTX was once a top exchange, but its collapse wiped out over $8 billion in customer deposits. The dispute centers around a 2021 share repurchase deal. At the time, Alameda Research, an affiliated trading firm, was insolvent and funded the deal with customer funds, forming the core of the clawback suit.
Serving U.S. counsel on Zhao, as per the trust, violates rules for foreign defendants, according to Binance. The case could define the reach of U.S. bankruptcy law over global crypto transactions and offshore gains, making it a significant test in the evolving landscape of digital asset regulation.
The FTX bankruptcy estate alleges that Binance improperly financed a 2021 share buyback deal using FTX-issued FTT tokens and Binance's stablecoin (BUSD), and this transaction forms part of the $1.76 billion clawback lawsuit initiated by FTX's bankruptcy administration. Zhao's legal team further argues that the contested transactions occurred through entities based offshore—in the British Virgin Islands, Ireland, and the Cayman Islands—and that U.S. bankruptcy law does not apply to these offshore transactions, as he is a foreign national residing in the UAE and has no substantial ties to Delaware or the U.S. jurisdiction.
