Changpeng Zhao, known as CZ, the founder and former CEO of Binance, is seeking to dismiss a $1.76 billion lawsuit from the insolvent FTX estate due to lack of jurisdiction.
Overview of the FTX Lawsuit
The complaint against CZ alleges that the 2021 sale of Binance’s stake in FTX was funded by stolen client funds channeled through Alameda Research.
FTX’s bankruptcy team is attempting to recover $1.76 billion, charging illegal transfer and constructive fraud. However, CZ claims he had no control over FTX's finances or operations.
CZ's Legal Strategy
CZ argues that he is not a U.S. citizen and resides in the UAE, asserting that the transactions at the heart of the complaint occurred entirely outside the U.S. His legal team filed a motion focusing on lack of jurisdiction and improper service of process.
CZ's main argument hinges on the assertion that U.S. courts lack authority over him or the offshore transactions involved.
Impact on the Crypto Legal Landscape
If the court rules in CZ’s favor and dismisses the FTX lawsuit, it could significantly limit FTX’s ability to recover funds from foreign partners. It would compel FTX’s legal team to take multiple international actions in various countries, each with its own procedural requirements.
This case highlights broader issues regarding the applicability of U.S. law to decentralized and internationally spread cryptocurrency networks, underscoring limitations of jurisdiction in addressing borderless financial technologies.
The Delaware court has yet to rule on the motion, and the outcome of this case may significantly affect the asset recovery process for FTX's creditors.
