However, Zhao argues that the case is an attempt to “unreasonably shift blame” to him instead of FTX founder Sam Bankman-Fried, who is currently serving a 25-year prison sentence for fraud. Now residing in the UAE, Zhao also claims that the case has no jurisdiction in the U.S. since the entire transaction occurred outside the country and the relevant statutes have no extraterritorial application.
FTX, now run by a team of lawyers focused on recovering assets for creditors, claims the exchange knowingly used customer funds for the $1.8 billion repurchase deal with Binance, even though it couldn’t afford the transaction at the time.
Zhao insists he was not involved in or had control over any of the cryptocurrency transfers. The parties involved were based in Ireland, the Cayman Islands, and the British Virgin Islands — jurisdictions beyond U.S. legal reach.
His legal team argued that Zhao was merely a “nominal counterparty” and not a recipient of the crypto assets, which consisted of Binance USD (BUSD) and FTX Token (FTT), with no fiat currency involved.
Regarding his controversial social media posts in late 2022, Zhao said they did not cause FTX’s collapse, as alleged. After CoinDesk reported that a large portion of FTX’s assets were in its own token (FTT), Zhao posted that Binance would sell its FTT holdings. FTX claimed this triggered mass withdrawals and accelerated its downfall.
Zhao’s lawyers countered that the company’s collapse was inevitable due to its fraudulent nature. “Even if the timing of the collapse was influenced by Mr. Zhao’s posts, FTX was a fraudulent enterprise that should never have existed,” they argued.
In May, Binance also filed a motion to dismiss the lawsuit, calling it “legally deficient” and reiterating that FTX collapsed due to being “one of the most massive corporate frauds in history.” FTX also sued two former Binance executives, Samuel Wenjun Lim and Dinghua Xiao, both of whom have likewise requested the court to dismiss the claims.
While Zhao served a four-month prison sentence last year for money laundering violations, Sam Bankman-Fried received a 25-year sentence in March 2024 for his role in the FTX scandal. He is currently appealing the conviction, with a hearing scheduled for November.
