Former Binance CEO Changpeng Zhao has requested the court docket to dismiss a lawsuit by FTX that seeks to get well almost $1.8 billion from a deal between Binance and FTX, which the defunct alternate claims was fraudulently transferred.
Zhao informed a Delaware chapter court docket that the swimsuit appears 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 swimsuit’s claims “are up to now eliminated” from the US that “the statutes at subject, which lack extraterritorial utility, 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 alternate had bought.
FTX, now beneath the management of a crew of attorneys trying to maximize creditor returns, mentioned the alternate and Bankman-Fried knew it couldn’t bankroll the share repurchase, so that they used buyer funds to get the deal executed.
Zhao says he wasn’t a part of the transfers
Zhao argued that “each pertinent half” of the share repurchase deal occurred exterior the US, because the Binance entities concerned are primarily based in Eire, the Cayman Islands, and the British Virgin Islands (BVI), and the FTX-linked agency, Alameda Ltd, was additionally primarily based within the BVI.
He added the deal used cryptocurrency, particularly Binance USD (BUSD), a stablecoin created by the alternate, and FTX Token (FTT), which was created by FTX.
“Plaintiffs don’t alleged that Mr. Zhao obtained 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 argued that his X posts concerning FTX and Binance’s sale of FTT tokens didn’t contribute to the crypto alternate’s collapse as the corporate has alleged.
After CoinDesk reported in November 2022 that FTX’s holdings had been principally 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.
Associated: From Coinbase to Milei and LIBRA: Crypto class-action fits pile up
Nevertheless, Zhao mentioned in his movement that his posts didn’t add to a run on FTX and its collapse as 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 definitely no proper to persist in fraud indefinitely.”
“To carry 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 on ‘the proverbial run on the financial institution,’” his attorneys argued.
Binance additionally sought dismissal
In Might, 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 “one of the vital large 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 court docket final month to dismiss the swimsuit.
Zhao served 4 months in jail final yr after pleading responsible to cash laundering. Bankman-Fried was sentenced to 25 years in jail in March 2024 for his position in FTX’s fraud. He has appealed the conviction and a listening to is about for November.
Journal: Crypto merchants ‘idiot themselves’ with value predictions — Peter Brandt
