- Former Binance CEO Changpeng Zhao is fighting a lawsuit from the bankrupt crypto exchange FTX, which claims he owes them $1.8 billion.
- Zhao argues that the deal in question happened outside the U.S. and that FTX’s collapse was its fault, not his.
Former Binance CEO Changpeng Zhao is pushing back against a massive lawsuit from the failed crypto exchange FTX. He has asked a Delaware bankruptcy court to throw out the $1.8 billion lawsuit, which accuses him of receiving money that FTX had stolen from its customers.
In his motion to dismiss the case, Zhao claims that FTX is trying to blame him for the crimes of its own founder, Sam Bankman-Fried, who is now in prison for fraud. This legal battle is a notable chapter in the ongoing story of two of the biggest names in the crypto world.
Disputing the Deal
At the centre of the dispute is a deal from 2021 where FTX bought back shares from Binance. FTX claims it used nearly $1.8 billion of customer money to make this payment. However, Zhao’s legal team argues that he should not be held responsible. They say that the deal was an international one and that U.S. laws don’t apply.
The companies involved were based in places like the British Virgin Islands, Ireland, and the Cayman Islands, and the deal used different cryptocurrencies like Binance USD (BUSD) and FTX Token (FTT), not U.S. dollars. Zhao’s lawyers also point out that he was not the direct recipient of the money, but was just a nominal counterparty to the transaction.
In simpler terms, they argue that he was part of the deal on paper but didn’t personally get or control the funds.
Zhao also addressed his social media posts from November 2022, which FTX claims helped cause its collapse. After a news report questioned FTX’s financial health, Zhao announced on X that Binance was selling all its FTT tokens. This sparked widespread panic and led to a run on the bank, where a huge number of FTX customers rushed to withdraw their money.
FTX believes this was a deliberate act to harm the company.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books,
Zhao stated.Â
Zhao’s legal team likens his actions to those of a whistleblower revealing a Ponzi scheme. They argue that FTX was already a fraudulent company on the path to collapse, so Zhao shouldn’t be held responsible for its downfall. While they acknowledge his posts might have hastened FTX’s demise, they insist the real blame lies with the fraudulent actions of FTX’s leadership. The court case is ongoing as both sides continue to argue their positions.
