IN RE: FTX TRADING LTD. (2026)

Chapter 11

Related to Docket Nos. 62, 66, 92, 95, 104

OPINION AND ORDER REGARDING DEFENDANTS’ MOTIONS TO DISMISS THE COMPLAINT

Upon consideration of Defendant Digital Anchor Holdings Limited's Motion to Compel Arbitration, Dismiss, or Abstain,¹ Defendants Binance Holdings Limited's, Binance Holdings (IE) Limited's, and Binance (Services) Holdings Limited's Motion to Dismiss the Complaint,² Defendant Samuel Wenjun Lim's Motion to Dismiss the Complaint,³ Defendant Dinghua Xiao's Motion to Dismiss the Complaint,⁴ and Defendant Changpeng Zhao's Motion to Dismiss ⁵ (collectively, the “Motions”), the Court hereby finds, concludes, and orders as follows:

I. SUMMARY OF ALLEGED FACTS 6

A. The Parties

This adversary proceeding arises from the November 2022 chapter 11 bankruptcy cases of FTX Trading Ltd. (“FTX Trading”) and its affiliated debtors (together, the “Debtors” or “FTX”). FTX Trading was founded in 2019 by Sam Bankman-Fried (“Bankman-Fried”).⁷ It did business as “FTX.com”, a global exchange that offered customers the ability to trade cryptocurrencies and related assets. A few years prior to founding FTX Trading, Bankman-Fried co-founded the crypto trading hedge fund, Alameda Research LLC (together, with its subsidiaries, “Alameda”).⁸

Defendant Binance ⁹ was founded around the same time by defendant Changpeng Zhao (“Zhao” or “CZ”).¹⁰ The Binance enterprise is comprised of dozens of corporate entities incorporated in jurisdictions around the world, all of which are owned directly or indirectly by CZ.¹¹ Today, Binance.com is the largest cryptocurrency trading exchange in the world.¹² Some of that success has been attributed to a patent disregard for, and affirmative violation of, the laws of the United States.¹³ In 2023, in connection with actions brought by the United States, Binance Holdings Limited, d/b/a Binance.com, and CZ pled guilty to charges of failing to maintain an effective anti-money laundering program, conducting an unlicensed money transmitting business, and violating sanctions compliance policies.¹⁴ In the pleas entered to resolve these actions, Binance.com and CZ admitted to violating United States law “in a deliberate and calculated effort to profit from the U.S. market” and acknowledged that “U.S. users were essential for Binance to grow, were a significant source of revenue, and had a substantial network effect.”¹⁵ The Binance Defendants (except for Digital Anchor) and Defendant Lim also faced a related action by the Commodity Futures Trading Commission captioned Commodity Futures Trading Commission v. Changpeng Zhao, et al., Civil Action No. 1:23-cv-01887 (N.D. Il.) (the “CFTC Action”)), which was resolved by entry of two consent orders – the “Binance Consent Order”  ¹⁶ and the “Lim Consent Order”.¹⁷

B. The Share Repurchase

In 2019, Binance and CZ acquired a 20% equity stake in FTX Trading for $18.3 million.¹⁸ Then, when Bankman-Fried expanded his cryptocurrency business into the United States under the umbrella of parent company West Realm Shires, Inc. (“WRS” and, together with its subsidiaries, “FTX U.S.”), Binance and CZ, along with Binance executives Dinghua Xiao (“Xiao”) and Wenjun Lim (“Lim”) (together, the “Management Defendants”) acquired an 18.4% stake in that company for just two dollars.¹⁹

On July 15, 2021, certain FTX executives and a newly created subsidiary of Alameda (Euclid Way Ltd.) agreed to pay a quantity of cryptocurrencies equal to approximately $1.76 billion to repurchase the shares held by Binance, CZ, and the Management Defendants (the “Share Repurchase” or the “Transfer”).²⁰ It is alleged that Alameda directly funded the Share Repurchase and made the Transfer.²¹ Loan agreements were allegedly executed so that Alameda could be repaid by the FTX buyers but nothing was ever paid (or intended to be).²²

The consideration Alameda paid for the Share Repurchase took the form of three cryptocurrencies – FTT (FTX's native token), BNB (Binance's native token), and BUSD (Binance's stablecoin).²³ The FTT, which is alleged to have been worthless at the time due to FTX's hidden insolvency,²⁴ was transferred directly to Binance.²⁵ The BNB and BUSD were transferred from Alameda to Binance using an Alameda-controlled account on the Binance.com exchange.²⁶ Before the BUSD could be transferred to Binance, it needed to be “minted” and issued by a third-party New York trust maintained by an entity called “Paxos” following the receipt of approximately $721 million of United States dollars from Alameda.²⁷

In large part due to Bankman-Fried's pervasive and now well-known malfeasance at FTX, the Transfer occurred when FTX was insolvent.²⁸ A balance sheet prepared just prior shows that Alameda's net asset value was approximately negative $2.7 billion, with liabilities of $9.4 billion.²⁹ Plaintiffs allege that FTX Trading's second in command, Caroline Ellison, informed Bankman-Fried that Alameda did not have sufficient funds to complete the Share Repurchase.³⁰ He responded by directing Alameda “borrow” approximately $1 billion of customer deposits from the FTX.com platform.³¹ While this “borrowing” had been ongoing, the amount taken for the Share Repurchase was a “significant scaling up”.³²

Plaintiffs allege that communications from the time of the Transfer show that Bankman-Fried's goal was to use the Share Repurchase to project confidence and strength to the market, concealing both FTX's underlying insolvency and the fraudulent use of customer deposits.³³ This intent was reflected in an exchange a few days later between Bankman-Fried and a reporter. In response to the reporter's request to “take a look at Alameda's asset breakdown” and the reporter's comments that “profits must be huge,” Bankman-Fried responded “[t]he purchase was entirely from Alameda. Yeah, it had a good last year.”³⁴ But of course this was false – Alameda funded the Share Repurchase using customer deposits “it “borrowed” from FTX Trading.

C. The Fall of FTX

Bankman-Fried's “borrowing” of customer deposits to fund Alameda's investments left FTX in a precarious position. Customer funds deposited with FTX Trading could be withdrawn by the customers at any time. At the time of the Share Repurchase, neither FTX Trading, nor Alameda, had the assets to satisfy customer withdrawal requests if a significant portion of customers made demands at the same time.³⁵ Nevertheless, FTX was able to keep up its appearance as a hugely profitable enterprise for more than a year following the Share Repurchase.³⁶ It was not until November 2022, when things began to publicly fall apart.³⁷

Confidential Alameda financials were leaked to the cryptocurrency news and media company, CoinDesk.³⁸ On November 2, 2022, CoinDesk published an article that raised serious concerns about the financial condition of both Alameda and FTX Trading.³⁹ Within FTX, it was strongly suspected that Binance and CZ were involved in the leak to CoinDesk. CZ and Bankman-Fried had become enmired in a well-known feud, due in part to their differing views on cryptocurrency regulation.⁴⁰

The CoinDesk article prompted an increase in customer withdrawal rates that began to slow after a few days.⁴¹ Then, on November 6, CZ posted a series of tweets (the “November 6 Tweets”) indicating that “due to recent revelations,” Binance would be liquidating all of its FTT.⁴² The November 6 Tweets clarified that Binance would attempt to sell its FTT in a manner to minimize market impact. They also stated that Binance's actions were not a “move against a competitor.”⁴³ Notwithstanding, Plaintiffs allege that the November 6 Tweets were calculated to destroy FTX and improve Binance's market position by capturing FTX's customers.⁴⁴

The November 6 Tweets sparked a massive surge of customer withdrawals, and FTX did not have sufficient funds to address them.⁴⁵ A crisis ensued. FTX was in desperate need of an infusion of capital.⁴⁶ An emergency funding team was formed, and Bankman-Fried directed FTX to “take whatever we can get on whatever terms make people comfortable.”⁴⁷

Around 1 a.m. on November 8, Bankman-Fried called CZ and revealed to him that Alameda had been borrowing customer deposits from FTX, that the company lacked the liquidity necessary to satisfy the surge of customer withdrawals, and that they needed financing.⁴⁸ Around 2:30 a.m., CZ confirmed that Binance would propose a full takeover.⁴⁹ Within hours, the two executed a letter of intent (the “LOI”).⁵⁰ The LOI provided that, subject to due diligence, Binance would acquire FTX and inject capital sufficient to address FTX's liquidity issues.⁵¹ FTX agreed to an exclusivity period in the LOI, which prevented it from seeking rescue financing from other sources.⁵² After signing the LOI, CZ tweeted again, informing the public that Binance signed a non-binding LOI to acquire FTX (the “November 8 Tweets”).⁵³ But the deal was not to be.

Just over a day later, on November 9, Binance tweeted that it was backing out of the deal “as a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations,” stating publicly that “the issues are beyond our control or ability to help” (the “November 9 Tweets” and together with the November 6 and 8 Tweets, the “Tweets”).⁵⁴ FTX was unable to secure financing from any other source before the Securities Commission of The Bahamas petitioned for the winding up of FTX Digital Markets Ltd.⁵⁵ in The Bahamas on November 10, and the companies filed for chapter 11 bankruptcy protection in the United States on November 11.⁵⁶

II. RELEVANT PROCEDURAL HISTORY

Plaintiffs commenced this adversary proceeding seeking, in Counts I through V of their Complaint, to avoid and recover from all Defendants the Transfer made on account of the Share Repurchase as an actual and constructive fraudulent transfer (the “Fraudulent Transfer Claims”). Plaintiffs seek in Counts VI through IX damages from the Binance Defendants for injuries they caused FTX by the allegedly false or misleading Tweets (the “State Law Claims”). Defendants seek dismissal of the Complaint under Rules 12(b)(1), (2), (4) and (6) of the Federal Rules of Civil Procedure (the “Federal Rules”). They also seek an order compelling arbitration of the Fraudulent Transfer Claims and an order abstaining from the State Law Claims. Briefing on the Motions is complete, and oral argument held. They are ripe for adjudication.

III. JURISDICTION AND VENUE

As discussed herein, the Court has subject matter jurisdiction over this proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157, and the Amended Standing Order of Reference of the United States District Court for the District of Delaware. Venue is proper pursuant to 28 U.S.C. § 1409(a).

IV. DISCUSSION

The Defendants have advanced a myriad of arguments in support of their request for complete dismissal of the Complaint. To the extent that an argument has not been addressed in this Opinion, it has been carefully considered by the Court and rejected.

A. Subject Matter Jurisdiction

Federal Rule 12(b)(1) requires dismissal of claims over which the Court lacks subject matter jurisdiction. The Binance Defendants argue that the Court lacks subject matter jurisdiction over the State Law Claims because those claims lack the necessary “close nexus” to the Debtors’ plan or proceeding that is required for “related to” jurisdiction following confirmation under the Third Circuit's holding in Binder v. Price Waterhouse & Co., LLP (In re Resorts Int'l, Inc.).⁵⁷

This Court has held that the Third Circuit's “close nexus” test under Resorts applies to post-confirmation claims once a bankrupt debtor's estate ceases to exist.⁵⁸ Until then, the less stringent “conceivable effect” test announced by the Third Circuit in Pacor, Inc. v. Higgins applies.⁵⁹ While in many bankruptcy cases, an estate ceases to exist immediately upon confirmation of a plan, the Debtors’ estates continued until their plan of reorganization went into effect several months after confirmation. Accordingly, the claims filed after confirmation but before the effective date, like the State Law Claims, are subject to Pacor’s “conceivable effect” test. As stated in Pacor, a bankruptcy court has jurisdiction over a proceeding so long as “the outcome of that proceeding could conceivably have any effect on the estate[.]”⁶⁰ The Court holds that this standard is met here because the prosecution of the State Law Claims may result in the recovery of additional funds for creditors. Subject matter jurisdiction is therefore proper.⁶¹

B. Personal Jurisdiction

Defendants move for dismissal of the Complaint pursuant to Federal Rule 12(b)(2), which provides dismissal for “lack of personal jurisdiction.”⁶² There are two types of personal jurisdiction – general and specific.⁶³ “When a court has general jurisdiction over a party, that means lawsuits arising from any transaction can be brought against the party in that [forum] — regardless of whether the transaction itself had any ties to the forum.”⁶⁴ Specific jurisdiction, by comparison, “depends on an ‘affiliatio[n] between the forum and the underlying controversy,’ principally, activity or an occurrence that takes place in the forum[.].”⁶⁵ Plaintiffs seek to establish specific jurisdiction. “In bankruptcy cases the forum is the United States in general, not the particular forum state.”⁶⁶

As the Third Circuit explains,⁶⁷ there are two tests for specific jurisdiction: (1) the traditional “minimum contacts” or “purposeful availment” test;⁶⁸ and (2) the “effects” test.⁶⁹ Application of the “minimum contacts” test involves a three-part inquiry:

[First] the plaintiff must show that the defendant has “minimum contacts” with the forum such that it “purposefully avail[ed] itself of the privilege of conducting activities within the forum” and “invoke[ed] the benefits and protections of [the forum's] laws.” Second, the plaintiff's claims must “arise out of or relate to” at least some of those contacts, evidencing “a strong relationship among the defendant, the forum, and the litigation.” Finally, the exercise of jurisdiction over the defendant must “comport[ ] with traditional notions of fair play and substantial justice” such that “the defendant ‘should reasonably anticipate being haled into court’ in that forum.”70

Alternatively, if a plaintiff asserts a claim for an intentional tort, courts may apply the “effects test,” which asks whether the forum is the “focus” of the defendant's tortious conduct. The “effects test” requires a plaintiff to plead facts establishing that:

(1) the defendant committed an intentional tort; (2) the plaintiff felt the brunt of the harm in the forum; and (3) the defendant expressly aimed his tortious conduct at the forum.71

“Because [the specific jurisdiction] analysis depends on the relationship between the claims and contacts, [courts] generally evaluate specific jurisdiction on a claim-by-claim basis.”⁷²

If a defendant moving for dismissal under Federal Rule 12(b)(2) submits an affidavit contradicting the allegations of a complaint supporting personal jurisdiction, the plaintiff cannot rest on its complaint and must submit its own evidence in support of jurisdiction.⁷³ However, if a defendant does not provide its own evidence, then “the plaintiff need only establish a prima facie case of personal jurisdiction and the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor” for the court's personal jurisdiction analysis.⁷⁴

1. Group Pleading

The Binance Defendants begin with a threshold argument that Plaintiffs are improperly attempting to establish jurisdiction over them as a group rather than individually. Defendants are correct that “in general, a court must analyze questions of personal jurisdiction on a defendant-specific and claim-specific basis,”⁷⁵ but this is a circumstance in which it is appropriate to consider the allegations against the Binance Defendants as a group. Plaintiffs allege that CZ “directly or indirectly owned the scores of entities that collectively operate the Binance platform as a common enterprise” and that those entities “commingled funds, relied on shared technical infrastructure, and engaged in activities to collectively advertise and promote the Binance brand.”⁷⁶ They also allege that Binance relied “on a maze of corporate entities” that was “designed to obscure the ownership, control, and location of the Binance platform.”⁷⁷ Additionally, in opposing the Motions, Plaintiffs submitted documents that suggest that CZ exercised daily control over all of Binance's operations and had ultimate responsibility for all major decisions, business development, and management of the enterprise.⁷⁸ Together, the allegations and evidence support the notion that the Binance Defendants operated as a coordinated enterprise that did not observe meaningful distinctions among its various parts and that the corporate form was used to deceive, consistent with the alter ego theory of personal jurisdiction.⁷⁹ The Court therefore concludes that it is appropriate at this stage of the proceeding to consider the contacts of the Binance Defendants (which includes defendants Digital Anchor ⁸⁰ and CZ) collectively.

2. The Binance Defendants

The Binance Defendants argue that the Court does not have personal jurisdiction over them with respect to the Fraudulent Transfer Claims because Plaintiffs cannot establish that Binance had the necessary minimum contacts with the United States or that their claims relate to such contacts.⁸¹ In their view, the Share Repurchase was an entirely foreign transaction involving foreign entities that lacks any meaningful connection to the United States.

Plaintiffs respond that they have submitted evidence suggesting that Binance “operated a cryptocurrency exchange wholly or in substantial part in the United States,” in a “deliberate and calculated effort to profit from the U.S. market[.]”⁸² With respect to the Share Repurchase specifically, Plaintiffs point out that: (1) a portion of the shares that Binance sold back to FTX were shares of “FTX.US” (a/k/a WRS); (2) emails suggest that Bankman-Fried was not amenable to a deal that did not include the FTX.US shares; (3) at Binance's request, the majority of the consideration Binance received for the Share Repurchase took the form of BUSD, a cryptocurrency that could only be minted by a New York trust; (4) Binance negotiated the terms of the deal with FTX's U.S.-based counsel; and (5) the Binance Defendants knew that the transaction would be funded by Alameda, the United States silo of FTX, using their own exchange operating in the United States.⁸³

The Binance Defendants have not submitted their own evidence on this issue, so the Court is left to the Complaint's allegations and the evidence submitted by Plaintiffs. Considering these and resolving all factual disputes in Plaintiffs’ favor, the Court determines that Plaintiffs have stated a prima facie case of personal jurisdiction over the Binance Defendants. The transaction at issue in the Fraudulent Transfer Claims is one in which the Binance Defendants sold assets located in the United States, i.e. their equity interests in WRS.⁸⁴ In doing so, the Binance Defendants negotiated with U.S. counsel and chose a form of payment that required the use of a New York trust. Then, the payment occurred on their own exchange operating substantially in the United States.⁸⁵ Although the Court does not determine at this stage whether Plaintiffs can ultimately establish personal jurisdiction over the Binance Defendants, the allegations described above are sufficient to state a prima facie case of jurisdiction over the Binance Defendants.

With respect to the State Law Claims, the Binance Defendants argue that these claims are based on Tweets sent from outside the United States to a worldwide audience and lack any connection to the United States specifically. Plaintiffs disagree and argue that they have alleged sufficient United States contacts, including that: (1) CZ was aware that FTX had a substantial customer base in the United States, which CZ wanted to capture; (2) Binance negotiated the LOI with FTX representatives located in the United States; (3) Binance engaged a public relations company in New York and held a call with them (and FTX) to discuss announcing the deal; (4) Binance posted the Tweets using accounts typically used to speak to the United States market; and (5) following FTX's collapse, and as a result of the Tweets, Binance gained a nearly 20% market share, made largely of United States customers.⁸⁶

The Court agrees with Plaintiffs and finds that they have stated a prima facie case for jurisdiction over the Binance Defendants with respect to the State Law Claims. The claims arise from conduct allegedly taken to destroy FTX (including FTX U.S.) for the purpose of (and with the result of) acquiring customers located in the United States. Additionally, the deal was negotiated with United States counsel and arrangements were made with a United States public relations firm to announce it. The Binance Defendants’ Motions with respect to personal jurisdiction will therefore be denied.

3. Samuel Wenjun Lim

Defendant Lim, Binance's Chief Compliance Officer at the time of the Share Repurchase, argues that the Court lacks personal jurisdiction over him because his only involvement in the Share Repurchase was to nominally hold and sell the WRS shares on behalf of Binance. According to Mr. Lim's declaration submitted with his Motion, he is not a United States citizen, never resided in the United States, and never owned property in the United States. As nominal shareholder of the WRS securities, Mr. Lim claims that he held the shares exclusively on behalf of Binance. He never possessed any decision-making authority with respect to the shares, never engaged in any substantive business activities relating to WRS, never traveled to the United States to meet with anyone regarding WRS, and never communicated with any United States WRS employees.⁸⁷

Plaintiffs respond that, in addition to his involvement as a nominal party to the Share Repurchase, Mr. Lim, as an officer of Binance, knew and actively participated in Binance's scheme to conduct trillions of dollars in transactions with United States citizens while avoiding United States regulatory requirements. Plaintiffs argue that Mr. Lim admitted in the CFTC Action that he “knew that Binance's reliance on a maze of corporate entities to operate the Binance platform is deliberate, and was designed to obscure the ownership, control, and location of the Binance platform.”⁸⁸ Plaintiffs also note Mr. Lim's acknowledgement in the Lim Consent Order that he aided and abetted the Binance enterprise in, among other things, conducting an office or business in the United States for the purpose of dealing in leveraged retail commodity transactions in a manner that violated United States law.⁸⁹ In Plaintiffs’ view, the Lim Consent Order, along with the findings in the Binance Consent Order (which Plaintiffs say “establishes the Binance Enterprise's sweeping U.S. connections while Lim was a senior executive”), show that “at Lim's direction and knowledge, the Binance Defendants operated a multi-trillion-dollar cryptocurrency operation in the U.S. and exploited the U.S. market at every opportunity.”⁹⁰

The Court concludes that Plaintiffs have not met their burden of stating a prima facie case with respect to this Court's personal jurisdiction over Mr. Lim. Plaintiffs rely heavily on Mr. Lim's involvement in the Binance activities subject to the consent orders, but that involvement appears to have been limited in scope and unrelated to the claims here.⁹¹ The only United States contact that Plaintiffs allege Mr. Lim had with respect to the Transfer is that the Transfer arose from the sale of United States stock held by Mr. Lim. But there is no dispute that Mr. Lim held and sold those shares nominally on behalf of Binance, and the Complaint lacks any allegation that Mr. Lim received any consideration or benefit from the Share Repurchase. There are no further facts in the Complaint that Mr. Lim purposely directed conduct towards the United States or otherwise availed himself of this forum with respect to the Share Repurchase, and Plaintiffs have offered no evidence to rebut Mr. Lim's declaration. Accordingly, Plaintiffs have not satisfied the “traditional” test for jurisdiction.

Plaintiffs next argue that the Court can exercise jurisdiction over Mr. Lim under the “effects test,” but this argument is also unconvincing. That Mr. Lim held shares in a United States company and sold them in an allegedly fraudulent transaction that required use of a New York trust cannot serve as evidence that he intended for tortious conduct to cause an injury in the forum because Mr. Lim has stated under oath that these actions were taken at the behest of his employer, Binance.⁹² Plaintiffs have not offered any allegations or rebuttal evidence to support a conclusion that Mr. Lim intended for his conduct to cause harm in the United States.

These holdings require dismissal of the Fraudulent Transfer Claims against Mr. Lim. Plaintiffs instead seek jurisdictional discovery. This request is not appropriate because, as will be discussed, Plaintiffs have failed to state Fraudulent Transfer Claims against Mr. Lim.⁹³ Therefore, the request for jurisdictional discovery will be denied.

4. Dinghua Xiao

Defendant Xiao, another former employee of Binance, also moves to dismiss for lack of personal jurisdiction. Like Mr. Lim, Mr. Xiao's only involvement in the Share Repurchase was his sale of the WRS shares held nominally for Binance. In support of his motion, Mr. Xiao submitted a declaration stating that he is not a United States citizen and has never resided in the United States or owned property here.⁹⁴ He states that, as a nominal shareholder of the WRS securities, he held the shares exclusively on behalf of Binance and never possessed any decision-making authority with respect them.⁹⁵ He never engaged in any substantive business activities relating to WRS, never traveled to the United States to meet with anyone regarding WRS, and never communicated with any United States-based employees of WRS.⁹⁶

Like Mr. Lim, Plaintiffs rely entirely on their allegations and concede that Mr. Xiao held and sold the shares nominally. The Complaint contains no allegations that Mr. Xiao received any consideration or benefit from the sale. Plaintiffs largely rely on the same arguments made with respect to Mr. Lim – that Mr. Xiao's purchase and sale of WRS shares, even if only nominally and on Binance's behalf, demonstrate his intent to exploit the United States market.⁹⁷ For the reasons just explained, the Court is not persuaded. The claims against Mr. Xiao will therefore be dismissed. Although Plaintiffs also request jurisdictional discovery with respect to Mr. Xiao, that request is denied for the same reasons discussed with respect to Mr. Lim.

C. Service of Process

Following the commencement of this proceeding, the Court authorized service of the Complaint on Defendant CZ by alternative means ⁹⁸ pursuant to Federal Rule 4(f)(3), made applicable to this proceeding by Bankruptcy Rule 7004(1).⁹⁹ Thereafter, CZ consented to service through his United States counsel, and service was then effected.¹⁰⁰ He now argues that the service was improper under Federal Rule 4(f)(3) because it occurred within the United States. Invoking Federal Rule 12(b)(4), CZ moves to dismiss the Complaint for insufficient service of process.

Plaintiffs respond by highlighting the Scheduling Stipulation, in which CZ waived service of process defenses:

In view of the service discussed in Section 2 above, the Stipulating Defendant waives the defense of sufficiency of service of process but does not waive, but rather expressly reserves, any and all other rights, defenses, and objections to the claims in this action (including but not limited to defenses based upon lack of personal or subject matter jurisdiction, lack of standing, improper venue, or a defendant having been improperly named).101

CZ replies that this waiver was limited to the “sufficiency” of service, which he argues means that “the stipulation waives the procedural objection that transmission of papers did not occur but not the jurisdictional objection that service lacked legal basis, such that the court lacks personal jurisdiction altogether.”¹⁰²

The Scheduling Stipulation states that CZ “waived service through the means articulated in the Service Plan and accepted service through its counsel[.]”¹⁰³ Accordingly, he was not served under Federal Rule 4(f)(3), but by consent. Furthermore, CZ's argument regarding the meaning of the word “sufficiency” is misguided. Black's Law Dictionary defines the word “sufficient” to mean, among other things, “legally adequate.”¹⁰⁴ CZ cites nothing to support his interpretation that “sufficiency” means something different. Accordingly, his Motion regarding insufficient service of process will be denied.

D. Arbitration

Defendants next move to compel arbitration of the Fraudulent Transfer Claims under an arbitration clause of the Share Repurchase governing contracts. Plaintiffs contend that they are not bound by that provision, and the Court agrees. Before compelling a party to arbitrate, a court must consider two “gateway” questions. First, “whether the parties have a valid arbitration agreement at all (i.e., its enforceability)[.]”¹⁰⁵ Second, “whether a concededly binding arbitration clause applies to a certain type of controversy (i.e., its scope).”¹⁰⁶ Defendants’ Motion to compel arbitration fails at the first inquiry because Plaintiffs did not agree to arbitrate the Fraudulent Transfer Claims.

Defendants are correct that a trustee is generally bound by a debtor's prepetition non-executory contracts, including arbitration agreements.¹⁰⁷ But a trustee is bound to arbitrate only claims that are “derived from the rights of the debtor.”¹⁰⁸ Fraudulent transfer claims are not derived from the debtor, but rather “are creatures of statute, available in bankruptcy solely for the benefit of creditors of the debtor, whose rights the trustee enforces.”¹⁰⁹ Stated differently, “when a trustee or debtor-in-possession asserts a pre-bankruptcy claim against a counterparty, an arbitration clause must be enforced. But when the debtor brings an avoidance action, the arbitration clause in a pre-bankruptcy contract does not apply.”¹¹⁰ Therefore, the Defendants’ Motions on this issue will be denied.

E. Failure to State a Claim – Fraudulent Transfer Claims (Counts I-V)

Federal Rule 12(b)(6) provides dismissal for a plaintiff's “failure to state a claim upon which relief can be granted.” To survive a motion to dismiss, a plaintiff must allege well-pleaded facts with sufficient detail to “state a claim to relief that is plausible on its face.”¹¹¹ The Third Circuit has adopted a two-part analysis to employ when deciding a motion to dismiss for failure to state a claim.¹¹² “First, the factual and legal elements of a claim should be separated” with the reviewing court accepting “all of the complaint's well-pleaded facts as true, but ․ disregard[ing] any legal conclusions.”¹¹³ Next, the reviewing court must “determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’ ”¹¹⁴

1. Extraterritoriality

Defendants argue that the Court must dismiss the Fraudulent Transfer Claims because the Transfer involved foreign conduct to which the Bankruptcy Code's avoidance and recovery provisions do not apply.¹¹⁵ Plaintiffs disagree. They submit that the provisions apply to conduct outside the United States but that even if they do not, the Transfer was sufficiently centered in the United States to warrant application of the provisions.

“It is a basic premise of our legal system that, in general, ‘United States law governs domestically but does not rule the world.’ ”¹¹⁶ Therefore, unless a contrary intent clearly appears, “[i]t is a ‘longstanding principle of American law ‘that legislation of Congress [will] apply only within the territorial jurisdiction of the United States.’ ”¹¹⁷ This principle, called the presumption against extraterritoriality, “ ‘serves to avoid the international discord that can result when U. S. law is applied to conduct in foreign countries’ and reflects the ‘commonsense notion that Congress generally legislates with domestic concerns in mind.’ ”¹¹⁸

Applying the presumption against extraterritoriality involves two inquiries. A court must determine whether the statutory provision at issue is extraterritorial, and it must also determine whether the suit before it seeks a domestic or foreign application of the provision.¹¹⁹ These questions may be answered in any order. In this proceeding, because the Court has determined from the allegations of the Complaint that Plaintiffs’ action seeks a domestic application of the Bankruptcy Code's avoidance and recovery provisions, it need not address at this time whether the provisions may be applied extraterritorially – a complex and thorny issue that has resulted in differing opinions from courts tackling it.¹²⁰

“The Supreme Court teaches that we must look to a statute's ‘focus’ to determine whether a case involves a domestic application of that statute.”¹²¹ “The focus of a statute is the object of its solicitude, which can include the conduct it seeks to regulate, as well as the parties and interests it seeks to protect or vindicate.”¹²² Once the court identifies the statute's focus, it must then ask “whether the conduct relevant to that focus occurred in United States territory.”¹²³ “If the conduct relevant to the statute's focus occurred in the United States, then the case involves a [ ] domestic application even if other conduct occurred abroad.”¹²⁴ “But ‘if the conduct relevant to the focus occurred in a foreign country, then the case involves an [ ] extraterritorial application regardless of any other conduct that occurred in U.S. territory.’ ”¹²⁵ Determining domesticity therefore requires courts to separate the activity that matters from the activity that does not.¹²⁶

The Court agrees with others that have considered and held from the text and context of the avoidance and recovery provisions of the Bankruptcy Code that Congress seeks to regulate a debtor's “fraudulent transfer of property depleting the estate.”¹²⁷ Given that focus, it is the debtor's activity relevant to the initial transfer that must be examined to determine whether the transfers at issue occurred in the United States.¹²⁸ Circumstances regarding the recipient of the transfer or any subsequent transfers are not relevant to this analysis.¹²⁹

Defendants argue that Plaintiffs seek an extraterritorial application of the Bankruptcy Code because “every pertinent part of the ‘initial transfer’ occurred overseas.”¹³⁰ In support, Defendants point exclusively to the fact that the Transfer was alleged to have occurred between foreign entities (Alameda Ltd. and the Binance Defendants).¹³¹ In their view, the fact that these parties are all foreign entities conclusively establishes that the Transfer did not occur in the United States.

The Court cannot agree with this argument. First, as noted, the location of the Transfer recipients is irrelevant to the extraterritoriality analysis. Second, while the Binance Defendants correctly note that the Complaint refers at one point to Alameda Ltd., an alleged British Virgin Islands company, as the transferor, the Complaint is inconsistent on this point.¹³² More importantly however, focusing solely on Alameda Ltd. for the extraterritoriality analysis in this proceeding is too myopic given the allegations throughout the Complaint concerning the Alameda silo's corporate infrastructure and the logistics of the Transfer. When considered together, these allegations support an inference that the Transfer occurred in the United States.

The Complaint alleges multiple times that the Transfer was funded and transferred by “Alameda”. “Alameda” is defined by Plaintiffs as “Alameda Research LLC, a crypto trading hedge fund organized under the laws of Delaware (together with Alameda Ltd. and its subsidiaries ․).”¹³³ There are sufficient facts alleged in the Complaint and known generally to the Court from its administration of the FTX chapter 11 cases to infer for purposes of this initial pleading stage that the subsidiaries of the domestic parent Alameda Research LLC were its alter egos and that together, they operated the Alameda silo of the FTX enterprise.¹³⁴ Because Alameda Research LLC is a Delaware entity, it is reasonable to conclude that the Transfer was made by a United States debtor.

In addition, Plaintiffs have alleged that Alameda made a substantial portion of the Transfer using an Alameda-controlled account (in the name of Evergreen North Ltd.) on the Binance.com exchange.¹³⁵ As discussed above, Binance Limited, d/b/a Binance.com has admitted that the Binance.com exchange “did business wholly or in substantial part in the United States”¹³⁶ and in such a manner that subjected it to regulation under United States law.¹³⁷ Notwithstanding an admission that the ownership, control, and location of the Binance.com exchange was intentionally obfuscated through a maze of corporate entities,¹³⁸ it has been agreed that a third-party United States company hosted the Binance.com website, stored its data, and operated the exchange platform from the United States.¹³⁹ Together, these allegations support the reasonable inference that a United States debtor made the challenged Transfer within the United States.

Accordingly, the Court will conclude for this stage of the proceeding that the Transfer occurred domestically.¹⁴⁰ Whether further developed facts and briefing on this issue will support the same finding remains unknown ¹⁴¹ but for now, dismissal of the Plaintiffs’ avoidance and recovery claims based on a theory of impermissible extraterritorial application will be denied.

2. The Securities Safe Harbor Defense – Section 546(e)

Defendants argue that the Fraudulent Transfer Claims are barred by section 546(e) of the Bankruptcy Code, which precludes a trustee from avoiding transfers when “(1) there is a qualifying transaction (i.e., there is a ‘settlement payment’ or a transfer payment ․ made in connection with a securities contract), and (2) there is a qualifying participant (i.e., the transfer was made ‘by or to (or for the benefit of) a ․ financial institution, [or financial participant]’).”¹⁴² Defendants argue that both requirements are met here because the Transfer was made in connection with a securities contract and Alameda was a financial participant.

The parties focus their argument on the second point, so the Court will as well. The term “financial participant” is defined by section 101(22A) of the Bankruptcy Code as:

an entity that, at the time it enters into a securities contract ․ or at the time of the date of the filing of the petition, has one or more agreements or transactions described in paragraph (1), (2), (3), (4), (5), or (6) of section 561(a) [11 U.S.C. § 561(a)] with the debtor or any other entity (other than an affiliate) of a total gross dollar value of not less than $1,000,000,000 in notional or actual principal amount outstanding (aggregated across counterparties) at such time or on any day during the 15-month period preceding the date of the filing of the petition, or has gross mark-to-market positions of not less than $100,000,000 (aggregated across counterparties) in one or more such agreements or transactions with the debtor or any other entity (other than an affiliate) at such time or on any day during the 15-month period preceding the date of the filing of the petition.143

Defendants argue that Alameda meets this definition because a publicly available presentation by the Debtors to the Official Committee of Unsecured Creditors during the bankruptcy proceedings shows that Alameda held $631 million worth of securities investments as of the bankruptcy filing, “comprised of 100+ equity and fund investments, as well as equity and fixed income securities.”¹⁴⁴

While the securities safe harbor defense of section 546(e) has been applied early in proceedings to dismiss claims, that cannot occur here. The document on which the Defendants rely for the defense is far too vague to support the finding that Alameda was, at the time of the Transfer, a “financial participant.” To meet the requirements of section 101(22A), the Court needs to determine that the agreements or transactions referred to in the presentation are (1) of the type described in the enumerated paragraphs of section 561(a) of the Bankruptcy Code; (2) are not with an affiliate; (3) meet the required gross dollar value; and (4) were in existence within the specified time frames of section 101(22A). None of this information is available in the presentation. The Motions on this issue will therefore be denied.

3. Transferee – Section 550

CZ and the Management Defendants have moved to dismiss the Fraudulent Transfer Claims for Plaintiffs’ failure to allege that they were transferees of the Transfer or entities for whose benefit the Transfer was made, as required by section 550 of the Bankruptcy Code.¹⁴⁵ The Court agrees with the Management Defendants but not with CZ.

CZ points to allegations that he was merely a “nominal counterparty,”¹⁴⁶ that the receiver of the crypto-consideration was “one or more Binance entities,”¹⁴⁷ and that the Transfer went “to Binance.”¹⁴⁸ But, as already discussed, Plaintiffs have alleged sufficient facts regarding CZ's domination and control of the Binance enterprise to make it plausible that the Binance entities were his alter egos. Accordingly, Plaintiffs’ allegation that “one or more Binance entities” received the Transfer is sufficient for purposes of these Motions to allow the Court to conclude that any and all of the Binance Defendants, including CZ, was a transferee.¹⁴⁹

As to the Management Defendants, however, the Complaint states that the consideration for the Share Repurchase was transferred to Binance and the allegations fail to indicate that any benefit was received by the Management Defendants.¹⁵⁰ Moreover, in attempting to establish personal jurisdiction over the Binance Defendants, Plaintiffs concede that there is nothing to support the conclusion that anyone other than the Binance Defendants received the funds:

Despite the Binance Defendants’ protests that the Individual Defendants, and not the Binance Defendants, were the nominal sellers in the WRS prong of the 2021 Share Repurchase, the evidence is also clear that the Binance Defendants, and not the Individual Defendants, were the direct transferee for all of the consideration in connection with the 2021 Share Repurchase, including the consideration paid for the WRS shares. See Compl. ¶ 43; Chase Decl., Ex. 7 (showing that the BUSD for both the shares in WRS and FTX Trading went to the same wallet on the Binance.com platform).151

Having made this judicial admission,¹⁵² Plaintiffs cannot brush off the inconsistencies in their Complaint as simple pleading issues capable of amendment. For these reasons, the Management Defendants’ Motions will be granted.

4. Failure to Allege Certain Fraudulent Transfer Claim Elements 153

Defendants argue that the intentional Fraudulent Transfer Claims (Counts III and IV) fail because Plaintiffs have not sufficiently alleged that the Transfer was made with “actual intent to hinder, delay, or defraud.”¹⁵⁴ Plaintiffs may establish the necessary intent either through direct or circumstantial evidence.¹⁵⁵ The Court concludes that the Complaint states sufficient allegations of direct evidence of fraudulent intent.¹⁵⁶

Plaintiffs allege that the Share Repurchase was a critical component of Bankman-Fried's pervasive, fraudulent unauthorized use of FTX customer deposits and that he consummated the Share Repurchase to conceal his companies’ insolvency and send a false signal of strength to the market.¹⁵⁷ Defendants argue that these allegations fail to prove fraudulent intent because they are directly contradicted by other allegations of the Complaint that suggest that the Share Repurchase was CZ's attempt to distance himself from FTX due to a widely reported feud between himself and Bankman-Fried. They submit that this legitimate purpose – to effectuate a business divorce – undermines the Complaint's other allegations of actual fraudulent intent.¹⁵⁸

Defendants present a question of fact that cannot be resolved now. The Complaint alleges several facts to support the theory that the Share Repurchase was intended by Bankman-Fried to inflate FTX's financial strength, including that he insisted that the transaction was “really important” and had to get done even when he was told that Alameda could not afford it, and that he told a reporter who seemed skeptical about Alameda's ability to fund the entire repurchase on its own that “the purchase was entirely from Alameda[,]” though it was not.¹⁵⁹ The fact that CZ “later remark[ed]” that he decided to exit his position in FTX because of his personal grievances”¹⁶⁰ is not fatal to Plaintiffs’ theory of fraudulent intent as it presents the motivation of CZ (not Bankman-Fried) in agreeing to the Share Repurchase.

In a final attempt to dismiss the Fraudulent Transfer Claims, Defendants argue that the constructive Fraudulent Transfer Claims (Counts I and II) are not supported by sufficient allegations of insolvency and a lack of reasonably equivalent value.¹⁶¹ The Court cannot agree. For insolvency, the Complaint includes allegations that the: (1) Debtors overvalued FTT and other cryptocurrencies held by them that were closely tied to FTX and Bankman-Fried; (2) Debtors did not have the financial resources to satisfy all customer deposits; (3) FTX could not have continued to operate if customers attempted to withdraw their deposits; (4) Debtors had accrued large and unaccounted for regulatory liabilities; and (5) an internal balance sheet prepared just prior to the Transfer showed that Alameda had a net asset value of approximately negative $2.7 billion with liabilities of $9.4 billion.¹⁶² For lack of reasonably equivalent value, Plaintiffs have alleged that at the time of the Transfer, the value of the BNB, FTT, and BUSD that Debtors paid was worth approximately $1.46 billion, while the WRS and FTX Trading shares they received in exchange were worthless because both FTX Trading and WRS were balance-sheet insolvent at the time.¹⁶³

F. Failure to State a Claim – The State Law Claims

Plaintiffs contend that the Tweets of Binance and CZ give rise to state law claims for injurious falsehood, fraud, intentional misrepresentation, and unjust enrichment. It is their theory that Binance and CZ “sent a series of false, misleading, and fraudulent tweets that were maliciously calculated to destroy [CZ's] rival FTX, with reckless disregard to the harm that FTX's customers and creditors would suffer.”¹⁶⁴ According to Plaintiffs, the Tweets caused a wave of customer withdrawal requests that FTX could not honor and prevented FTX from seeking and obtaining much-needed financing from alternative sources.¹⁶⁵ Plaintiffs seek damages for the “destroyed value that would have otherwise been recoverable by FTX's stakeholders.”¹⁶⁶

Putting aside persuasive arguments regarding Plaintiffs’ failure to sufficiently allege the elements of these claims,¹⁶⁷ the Court agrees with the Binance Defendants that the claims as alleged are barred by the doctrine of in pari delicto. “In pari delicto, expressed in its most basic form, prohibits courts from ‘lend[ing] their good offices to mediating disputes among wrongdoers.’ ”¹⁶⁸ Under the doctrine of in pari delicto, “a plaintiff is barred from asserting a claim if the plaintiff participated in the wrongdoing that was a substantial cause of the alleged damages.”¹⁶⁹ “In pari delicto serves at least two important policy goals: deterring wrongful conduct by refusing wrongdoers any legal or equitable relief, and protecting the judicial system from having to use its resources to provide an accounting among wrongdoers.”¹⁷⁰ These policies are implicated here where it is clear from the face of the Complaint that it was the ongoing fraud at FTX and not the Binance Defendants’ alleged conduct, that was the primary cause of the lost value FTX attempts to collect from the Binance Defendants through the State Law Claims.  ¹⁷¹ Therefore, in adjudicating the State Law Claims, the Court would need to measure the wrongful conduct of both sides and “shift responsibility so that each [party] gets no more or less than its just share of the unjust desserts [sic] of its illegal conduct[.]”¹⁷² In pari delicto is designed to prevent this exercise.

The Complaint is replete with allegations of the fraud at FTX and the harm it caused. According to Plaintiffs’ own narrative, the fraudulent scheme perpetrated by Bankman-Fried was “pervasive”¹⁷³ and was the reason for the company's $9 billion balance sheet deficit and ultimate downfall.¹⁷⁴ The insolvency and severe liquidity crisis caused by the fraud had existed since at least July 2021 – more than a year before CZ put his alleged scheme to destroy FTX into effect.¹⁷⁵ Through their State Law Claims, Plaintiffs ask the Court to disregard the undisputed value already lost at FTX due to the long-term fraud, and to focus instead on tweets made during FTX's final five days that caused a second run on the bank and prevented FTX from obtaining rescue financing.¹⁷⁶ But any harm that may have been caused to FTX by these actions had already substantially occurred because of FTX's own fraudulent conduct. Simply put, the Tweets may have caused a wave of water to hit FTX, but there can be no doubt from FTX's own allegations that FTX was a ship sinking from a gigantic hole (a $9 billion one) caused by its own fraud.¹⁷⁷ In pari delicto stops this Court from having to determine the degree to which the CZ wave contributed to the sinking.

The Court acknowledges that Binance and CZ are not accused of participating in the FTX fraudulent scheme that left the Plaintiffs in pari delicto with them. The doctrine, however, is a broad one and is appropriately applied in the unique circumstance presented here where the Plaintiffs are culpable for and incurred the vast majority of the damages they seek to recover from Binance and CZ before Binance and CZ wrongfully acted. Despite a clever attempt to craft their claims, Plaintiffs essentially ask the Court to shift the consequences of their own wrongful and illegal conduct onto Binance and CZ, who, through their own misconduct, brought to the fore the financial crisis at FTX and then prevented it from recapturing value that had been previously lost by their own, self-imposed dilemma. This act of “referee[ing] between thieves”¹⁷⁸ is precisely what in pari delicto aims to avoid:

The doctrine derives “from motives of public policy, rather than from a regard for the interests of the objecting party․ The objection comes in appearance from the individual litigant, but in reality from society – the state – speaking through the courts.” In other words, the doctrine is not sourced in equity as between the litigants, but rather, in a societal desire not to waste judicial resources on apportioning wrong among wrongdoers. Courts of both law and equity are empowered to implement this societal concern.”179

Rather than address this broader issue, Plaintiffs make several arguments as to why their claims cannot be barred by the doctrine of in pari delicto. They first argue that the doctrine's “adverse interest exception” applies. Under this exception, fraudulent conduct of an officer will not be imputed to the corporation “if the officer's interests were adverse to the corporation and not for the benefit of the corporation.”¹⁸⁰ Plaintiffs argue that Bankman-Fried's misconduct was for his own benefit, citing their allegations that Bankman-Fried's goal was to use the Share Repurchase to project confidence and strength to the market.¹⁸¹

The Court does not find these allegations sufficient to invoke the adverse interest exception. It is “a narrow exception that applies only where the fraud is entirely adverse to the corporation's interest, such that the actor has completely abandoned the corporation's interests.”¹⁸² The adverse interest exception “will not enable a party to avoid application of in pari delicto if the illegal scheme furthers both the faithless fiduciary's interests and those of the corporation itself.¹⁸³ While the Court believes that this is precisely the case here, it need not go down that road because the adverse interest exception does not apply for an additional reason. “[T]he ‘adverse interest exception’ is itself subject to an exception – the ‘sole actor’ exception.”¹⁸⁴ This provides that where an agent dominates the principal, his conduct is imputable to the principal regardless of whether it was adverse to the principal's interests.¹⁸⁵ Plaintiffs have alleged facts indicating that Bankman-Fried dominated the Debtors.¹⁸⁶ These allegations are sufficient to support application of the sole actor exception to the adverse interest exception of in pari delicto.¹⁸⁷

Plaintiffs next argue that in pari delicto cannot be applied to them because they were not participants in the alleged wrongful conduct. However, the Third Circuit has rejected this argument when, as here, a plaintiff asserts claims standing in the shoes of a debtor against third-parties pursuant to section 541 of the Bankruptcy Code.¹⁸⁸ To the extent Plaintiffs question whether the conduct of Bankman-Fried and other FTX insiders can be imputed to the Debtors, the Court holds that it can. As the Delaware Chancery Court has explained,

[I]n pari delicto applies to bar claims between wrongdoers regardless of whether the plaintiff wrongdoer is a natural person or a corporation. A basic tenet of corporate law, derived from principles of agency law, is that the knowledge and actions of the corporation's officers and directors, acting within the scope of their authority, are imputed to the corporation itself. Delaware law adheres to this general rule of imputation – of holding a corporation liable for the acts and knowledge of its agents – even when the agent acts fraudulently or causes injury to third persons through illegal conduct. Though at superficial level it may appear harsh to hold an “innocent” corporation (and, ultimately, its stockholders) to answer for the bad acts of its agents, such “corporate liability is essential to the continued tolerance of the corporate form, as any other result would lack integrity.” These considerations are central to the in pari delicto doctrine: the practice of imputing officers’ and directors’ knowledge to the corporation means that, as a general rule, when those actors engage in wrongdoing, the corporation itself is a wrongdoer. As such, the company generally is barred from stating a legal or equitable claim against a third party that participated in the scheme of wrongdoing.189

Plaintiffs offer no argument as to why these standard principles should not apply here.¹⁹⁰

For much the same reason, the Court is also not persuaded by Plaintiffs’ suggestion that there is a public policy reason to refrain from applying in pari delicto to the State Law Claims. Plaintiffs contend that preventing them from recovering for CZ and Binance's wrongful conduct would unfairly prejudice FTX's creditors, who unwittingly funded a bad actor. Though Plaintiffs are correct that public policy implications must be carefully considered before in pari delicto is applied, the doctrine is subject to exception on this ground only “when another public policy is perceived to trump the policy basis for the doctrine itself.”¹⁹¹ “Cases falling under this seemingly diffuse ‘public policy exception’ are united by fact patterns involving statutory schemes like the federal securities laws that rely in significant part on private causes of action for their enforcement.”  ¹⁹² Such a fact pattern is not present here.¹⁹³

Plaintiffs’ public policy argument is also unpersuasive because it rests on “a flawed premise [that] is disguised by noble sentiment.”¹⁹⁴ The FTX estate, on behalf of its creditors, has not been left without recourse:

Even in cases where it might apply, ․ in pari delicto will not bar the corporation from suing its faithless fiduciaries, because of the fiduciary duty exception. Thus, the corporation has at least some remedy for wrongs done and a source for recoupment of its losses.195

For these reasons, the Court concludes that the State Law Claims are barred by the doctrine of in pari delicto. The Motions with respect to these claims will therefore be granted.

VI. ORDER

For the reasons stated above, the following is hereby ORDERED:

1. Counts I through V of the Complaint against Defendants Lim and Xiao are dismissed.

2. Counts VI through IX of the Complaint against the Binance Defendants are dismissed.

3. The remainder of the relief requested in the Motions is denied.

Dated: July 24th, 2026 Wilmington, Delaware

FOOTNOTES

1.   Adv. D.I. 62.

2.   Adv. D.I. 66.

3.   Adv. D.I. 92.

4.   Adv. D.I. 95.

5.   Adv. D.I. 104.

7.   Adv. D.I. 1 (the “Compl.”) ¶ 32.

8.   Id.

9.   The term “Binance” will refer collectively to corporate defendants Binance Holdings Limited, Binance Capital Management Co. Ltd a/k/a Digital Anchor Holdings Limited (“Digital Anchor”), Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited. The term “Binance Defendants” will refer to Binance and CZ, who owned and controlled those entities. The reasons for this are set forth below in the discussion regarding personal jurisdiction.

10.   Id. ¶¶ 2, 29.

11.   Id. ¶ 29.

12.   Id.

13.   Id. ¶ 2.

14.   Id.; see also Adv. D.I. 107-16 (Plea Agreement entered in the matter of U.S. v. Binance, Case No. 23-178RAJ (W.D. Wa.) (the “Binance Plea”)); Adv. D.I. 135-1 (Plea Agreement entered in the matter of U.S. v. Changpeng Zhao, Case No. CR23-179RAJ (W.D. Wa.) (the “CZ Plea”)).

15.   Binance Plea, Attachment A at 1-2; CZ Plea at 8.

16.   Adv. D.I. 107-17.

17.   Adv. D.I. 115-1. The plea agreements and consent orders may be considered by the Court for the purposes of deciding the Motions. Plaintiffs expressly mention some of these documents in their Complaint, see Compl. ¶ 24 (incorporating the Binance Consent Order, which incorporates the Binance Plea and the CZ Plea), and the Court may take judicial notice of them pursuant to Federal Rule of Evidence 201. See FED. R. EVID. 201 (providing that “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”).

18.   Compl. ¶ 34.

19.   Id. ¶¶ 3, 37.

20.   Id. ¶¶ 38-41. The Share Repurchase was memorialized in seven agreements executed by the parties. Id.

21.   It is unclear from the Complaint which Alameda entity made the various transfers of cryptocurrencies. See infra notes 132-134 and accompanying text.

22.   Compl. ¶ 44.

23.   Id. ¶¶ 41, 43.

24.   Id. ¶ 39. As FTX's native token, FTT derived its value from FTX's enterprise value. Id. ¶ 33.

25.   Id. ¶ 43.

26.   Id.

27.   Id.

28.   See, e.g., id. ¶¶ 1, 5, 6, 39, 42, 45, 49.

29.   Id. ¶ 46.

30.   Id. ¶¶ 46-47.

31.   Id.

32.   Id. ¶ 47.

33.   Id. ¶ 48.

34.   Id.

35.   Id. ¶ 49.

36.   Id. ¶¶ 50, 55.

37.   Id. ¶ 55.

38.   Id.

39.   Id.

40.   Id. ¶ 53.

41.   Id ¶ 76.

42.   Id ¶ 56.

43.   Id.

44.   Id. ¶¶ 56-58, 60-61.

45.   Id. ¶ 63.

46.   Id. ¶¶ 59, 63-64.

47.   Id. ¶ 64.

48.   Id ¶ 65.

49.   Id. ¶ 66.

50.   Id. ¶ 67.

51.   Id.

52.   Id.

53.   Id. ¶ 68.

54.   Id. ¶¶ 69-71.

55.   FTX Digital Markets Ltd. held the license to operate the FTX.com exchange in The Bahamas. Id. ¶ 77.

56.   Id. ¶ 73.

57.   Binder v. Price Waterhouse & Co., LLP (In re Resorts Int'l, Inc.), 372 F.3d 154, 168-69 (3d Cir. 2004) (“[W]here there is a close nexus to the bankruptcy plan or proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of a confirmed plan or incorporated litigation trust agreement, retention of post-confirmation bankruptcy court jurisdiction is normally appropriate.”).

58.   FTX Recovery Trust v. Patel (In re FTX Trading Ltd.), No. 24-50216 (KBO), 2025 WL 3008666, at **21-24 (Bankr. D. Del. Oct. 27, 2025).

59.   Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984) (holding that a bankruptcy court has related to jurisdiction over a proceeding so long as “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy”).

60.   Id.

61.   Defendant Digital Anchor argues that if the Court concludes that it has jurisdiction over the State Law Claims, it should permissively abstain from hearing them. Permissive abstention may be appropriate “in the interest of justice, or in the interest of comity with State courts or respect for State law.” 28 U.S.C. § 1334(c). The Court has considered the twelve factors that courts in this district apply to requests for permissive abstention, see LaRoche Indus. v. Orica Nitrogen LLC (In re LaRoche Indus.), 312 B.R. 249, 253 (Bankr. D. Del. 2004) and finds that the majority are either neutral or weigh against abstention. Digital Anchor's motion for abstention will therefore be denied.

62.   Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 146 (3d Cir. 1992), cert. denied, 506 U.S. 817 (1992).

63.   Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 (1984).

64.   Smith v. NMC Wollard, Inc., Civ. A. No. 19-5101, 2020 WL 1975074, at *2 (E.D. Pa. April 24, 2020).

65.   Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

66.   Astropower Liquidating Tr. v. Xantrex Tech., Inc. (In re Astropower Liquidating Tr.), Nos. 04-10322, 05-50867 (MFW), 2006 WL 2850110, at *3 (Bankr. D. Del. Oct. 2, 2006); accord Klingher v. Salci (In re Tandycrafts, Inc.), 317 B.R. 287, 289 (Bankr. D. Del. 2004) (“[T]he question posed by a federal long-arm statute is whether the defendant has ‘minimum contacts with the United States, rather than with a particular state.’ ” (quoting Anheuser–Busch, Inc. v. Paques (In re Paques), 277 B.R. 615, 628 (Bankr. E.D. Pa. 2000))); see also Fed. R. Bankr. P. 7004(d) (“A summons and complaint ․ may be served anywhere in the United States.”); Fed. R. Bankr. P. 7004(f) (“If exercising jurisdiction is consistent with the United States Constitution and laws, serving a summons ․ under this Rule 7004 or the applicable provisions of [Federal Rule] 4 establishes personal jurisdiction over a defendant ․”). CZ challenges application of this principal but, as discussed, he was served by consent through his counsel pursuant to Bankruptcy Rule 7004(b)(8).

67.   Hasson v. FullStory, Inc., 114 F.4th 181, 186-87 (3d Cir. 2024).

68.   Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) & Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).

69.   Id. (citing Calder v. Jones, 465 U.S. 783, 787 & n.6 (1984)).

70.   Id. (internal citations omitted).

71.   Id.

72.   Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007).

73.   Claridge Assocs., LLC v. Schepis (In re Pursuit Cap. Mgmt., LLC), 595 B.R. 631, 646 (Bankr. D. Del. 2018).

74.   Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004); see also Lasala v. Marfin Popular Bank Pub. Co., 410 F. App'x 474, 476 (3d Cir. 2011) (“A prima facie standard, under which the plaintiff's allegations are presumed true and all factual disputes are resolved in the plaintiff's favor, applies in situations where the District Court does not hold an evidentiary hearing prior to determining the existence of personal jurisdiction. Even if the plaintiff meets this prima facie standard, however, the ultimate burden remains on the plaintiff to demonstrate the existence of jurisdiction by a preponderance of the evidence.”).

75.   Miller Yacht, 384 F.3d at 95 n.1 (citing Calder, 465 U.S. at 790).

76.   Compl. ¶¶ 24-25.

77.   Id.

78.   Binance Consent Order at ¶¶ 19, 25; see also CZ Plea at 7 (“Defendant founded Binance in June 2017 and, as its chief executive officer, exercised day-to-day control over its operations.”).

79.   See Shuker v. Smith & Nephew, PLC, 885 F.3d 760, 781 (3d Cir. 2018) (“[I]f a subsidiary is merely the agent of a parent corporation, or if the parent corporation otherwise “controls” the subsidiary, then personal jurisdiction exists over the parent whenever personal jurisdiction (whether general or specific) exists over the subsidiary.”); Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 95 n.1 (3d Cir. 2004) (finding it appropriate to consider contacts of defendants together given allegations that individual defendants acted as partners and had authority to act on behalf of each other as well as corporate entities); see also Shenzhen Jisu Tech. Co. v. Shenzhen Fosala Tech. Co., Civil Action No. 1:25-cv-16605 (KMW-MJS), 2026 LEXIS 322851, at *17 (D.N.J. June 18, 2026) (allegations suggested possibility that Defendant “exercised such control over the corporate defendants that their forum contacts may be attributable to him, or that discovery may reveal facts supporting a veil-piercing, agency, or related jurisdictional theory”).

80.   Defendant Digital Anchor, formerly known as Binance Capital Management, argues that it should be treated separately from the other corporate Binance defendants because it was not a party to the criminal proceedings. But Plaintiffs have alleged that Digital Anchor was a part of the Binance enterprise, see Compl. ¶ 24 (defining the term “Binance” to include Binance Capital Management) and submitted evidence that the Binance exchange was operated by many entities, not just those named in the criminal proceedings. See, e.g., Binance Consent Order ¶¶ 19-24 (describing Binance's corporate structure as consisting of dozens of entities that “operate[d] the Binance platform as a common enterprise”). Digital Anchor did not submit any evidence on this issue in support of its Motion. Resolving factual disputes in Plaintiffs’ favor, as it must at this stage of the case, the Court finds that it is appropriate to assume that Digital Anchor was part of Binance's “maze of corporate entities.” See e.g., In re Volkswagen Timing Chain Prod. Liab. Litig., Civil Action No. 16-2765 (JLL), 2017 U.S. Dist. LEXIS 70299, at *29-30 (D.N.J. May 8, 2017) (“The allegations against each entity are clear, and, as Plaintiffs explain, ‘to the extent Plaintiffs assert common allegations as to [Defendants collectively],’ it is because the entities are intertwined through a complex corporate structure. Plaintiffs cannot be expected to know the exact corporate structure and degree of each Defendant's involvement, at this stage in the litigation and prior to discovery.”).

81.   The Binance Defendants do not meaningfully argue and thus have not persuaded this Court that an exercise of jurisdiction over them would fail to comport with the traditional notions of fair play and substantial justice.

82.   Binance Plea, Attachment A ¶¶ 1, 48.

83.   Compl. ¶¶ 15, 31, 38-41, 43; see also Adv. D.I. 107, Ex 1 (article discussing Binance partnership with New York based Paxos to launch BUSD); id., Ex. 4 (Bankman-Fried states, in response to initial proposal from Binance excluding WRS shares, that it is “important to include FTX US here” and that “the raise would be meaningfully different without it”); id., Ex. 5 (emails between Binance and FTX's United States counsel); id., Ex. 6 (indicating Binance preferred payment in BUSD); id., Exs. 13 and 14 (articles discussing Binance relationship with Paxos); id., Ex. 5 (FTX counsel informing Binance counsel that purchaser was a subsidiary of Delaware-based Alameda).

84.   Del. Code Ann. tit. 8, § 169 (“For all purposes of title, action, attachment, garnishment and jurisdiction of all courts held in this State, but not for the purpose of taxation, the situs of the ownership of the capital stock of all corporations existing under the laws of this State, whether organized under this chapter or otherwise, shall be regarded as in this State.”).

85.   See, e.g., Official Comm. of Unsecured Creditors of Arcapita, Bank. B.S.C. v. Bahr. Islamic Bank, 549 B.R. 56, 68 (S.D.N.Y. 2016) (“[W]hen a defendant purposely selects and uses a correspondent bank account to effectuate a particular transaction, and a plaintiff later files a lawsuit asserting a cause of action arising out of that transaction, the defendant can hardly claim that it could not have foreseen being haled into court in the forum in which the correspondent bank account it had selected is located.”); see also Grand Entm't Grp. v. Star Media Sales, 988 F.2d 476, 482 (3d Cir. 1993) (“[C]ontract negotiations with forum residents can empower a court to exercise personal jurisdiction over persons outside the forum.”).

86.   Compl. ¶¶ 19, 34, 69; Binance Plea Agreement, Attachment A ¶ 31 (describing how “VIP users” in the United States were important to Binance); CZ Plea Agreement ¶ 9 (discussing importance of United States users to Binance's growth); Binance Consent Order, Ex. 10 (email setting forth contact information for public relations discussions); Compl. ¶ 79 (Binance gained nearly 20% market share in 2022); Binance Plea Agreement, Attachment A; CZ Plea Agreement ¶ 9 (discussing Binance's efforts to attract users from the United States and the importance of those users to its success).

87.   Adv. D.I. 94.

88.   Lim Consent Order ¶ 19.

89.   Id. ¶ 33.

90.   Adv. D.I. 114 at 10-11.

91.   The same cannot be said of the Binance Defendants who appear to have been directed by CZ.

92.   Adv. D.I. 94.

93.   See Grynberg v. Total Compagnie Francaise Des Petroles, 891 F. Supp. 2d 663, 678 (D. Del. 2012), vacated in part on other grounds by, No. 10-1088-LPS, 2013 U.S. Dist. LEXIS 141580 (D. Del. Sep. 30, 2013) (denying request for jurisdictional discovery where it was clear that claims should be dismissed on Federal Rule 12(b)(6) grounds).

94.   Adv. D.I. 97.

95.   Id.

96.   Id.

97.   Mr. Xiao was not a party to the CFTC Action and is not alleged to have had any involvement in facilitating Binance's operations within the United States. Accordingly, the Court has not considered Plaintiffs’ allegations regarding the findings in the plea agreements or consent orders in considering whether Mr. Xiao has sufficient contacts with the United States to support personal jurisdiction.

98.   Adv. D.I. 79 (Order Granting Plaintiffs’ Ex Parte Motion to (A) Serve Individual Defendant Changpeng Zhao by Alternative Means and (B) Set A Scheduling Conference With All Defendants (“Alternative Service Order”)) at 2-3 (granting leave to serve CZ “through the means articulated in the Service Plan; namely, through: (1) personal email (if an email address is known); (2) social media (if the Individual Defendant has a known presence); (3) WhatsApp (if the Individual Defendant's phone number is known); (4) United States counsel (if the Individual Defendant has been represented by United States counsel in recent actions); and (5) certified courier service (if the Individual Defendant has a known address at which service has not yet been attempted).”).

99.   Fed. R. Civ. Proc. 4(f)(3) (providing for service on an individual in a foreign country “at a place not within any judicial district of the United States ․ by other means not prohibited by international agreement, as the court orders.”); see also Alternative Service Order at 3 (“Service in accordance with this Order is deemed effective and valid service upon the above-referenced Individual Defendant Changpeng Zhao consistent with Federal Rule 4(f)(3)”).

100.   Adv. D.I. 82-1 (Scheduling Stipulation) at 2 (“Defendant Changpeng Zhao waived service through the means articulated in the Service Plan and accepted service through its counsel in this Adversary Proceeding. Plaintiffs served Defendant Changpeng Zhao on or before June 4, 2025.”).

101.   Adv. D.I. 82-1 at ¶ 4(a).

102.   Adv. D.I. 141 at 2.

103.   Adv. D.I. 82, Ex. 1 at ¶ 2.

104.   SUFFICIENT, Black's Law Dictionary (12th ed. 2024).

105.   In re Remicade (Direct Purchaser) Antitrust Litig., 938 F.3d 515, 519 (3d Cir. 2019).

106.   Id.

107.   Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1153 (3d Cir. 1989) (“We see no reason to make an exception for arbitration agreements to the general rule binding trustees to prepetition non-executory contracts[.]”).

108.   Id. at 1154 (holding that “the trustee is bound to arbitrate all of its claims that are derived from the rights of the debtor under section 541[,] and that claims asserted under § 544(b) were not subject to arbitration because they are “not derivative of the bankrupt.”).

109.   In re Oakwood Homes Corp., No. 02-13396-PJW, 2005 WL 670310, at *4 (Bankr. D. Del. Mar. 18, 2005) (holding that, consistent with Hayes, the court “may not require fraudulent conveyance actions, under either 544(b) or 548 ․ to be submitted to arbitration.”) (citing Hays, 885 F.2d at 1155 (“Claims asserted by the trustee under section 544(b) are not derivative of the bankrupt. They are creditor claims that the Code authorizes the trustee to assert on their behalf.”) & In re EXDS, Inc., 316 B.R. 817, 826 (Bankr. D. Del. 2004) (“Since EXDS's § 548(a)(1) cause of action, like § 544(b), is Bankruptcy Code created (i.e., not [derivative] of the bankrupt) I cannot require EXDS to submit Claim VI to binding arbitration.”)).

110.   In re Yellow Corp., No. 23-11069 (CTG), 2024 WL 1313308, at *7 (Bankr. D. Del. Mar. 27, 2024) (citing Hays, 885 F.2d 1149 & In re Mintze, 434 F.3d 222 (3d Cir. 2006)).

111.   Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

112.   Fowler, 578 F.3d at 210.

113.   Id. at 210-11.

114.   Id. (quoting Iqbal, 556 U.S. at 679).

115.   Though there is some confusion on the issue in early case law, the question of whether a statute operates extraterritorially is neither a question of jurisdiction nor an affirmative defense. Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247, 255 (2010) (the question of what conduct a statute reaches or prohibits “is a merits question”); see also Litecubes, LLC v. N. Light Prods, 523 F.3d 1353, 1363 (Fed. Cir. 2008) (“[A] limitation on the extraterritorial scope of a statute is no different than any other element of a claim which must be established before relief can be granted under a particular statute”).

116.   RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325, 336 (2016) (quoting Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454 (2007)).

117.   Abitron Austria GmbH v. Hetronic Int'l, Inc., 600 U.S. 412, 417 (2023) (quoting Morrison, 561 U.S. at 255).

118.   Id. (quoting RJR Nabisco, 579 U.S. at 335-36).

119.   Id. at 417-18 & n.2.

120.   Compare e.g., In re Midland Euro Exch. Inc., 347 B.R. 708, 717 (Bankr. C.D. Cal. 2006) (finding the avoidance provisions of the Bankruptcy Code cannot be applied extraterritorially); In re Zetta Jet USA, Inc., No. LA CV21-07572 JAK, 2024 LX 109459, at *83-88 (C.D. Cal. Mar. 26, 2024) (same); In re Sherwood Invs. Overseas Ltd., Inc., 2016 WL 5719450 (M.D. Fla. Sept. 30, 2016) (same); Sec. lnv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 513 B.R. 222, 230 n.2 (S.D.N.Y. 2014), supplemented, No. 12-MC-115 JSR, 2014 WL 3778155 (S.D.N.Y. July 28, 2014) (same), with e.g., In re French, 440 F.3d 145, 152 (4th Cir. 2006) (finding the avoidance provisions of the Bankruptcy Code can be applied extraterritorially); In re Lyondell Chem. Co., 543 B.R. 127, 153 (Bankr. S.D.N.Y. 2016) (same); Sec. Inv. Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 480 B.R. 501, 528 (Bankr. S.D.N.Y. 2012) (same); Emerald Capital Advisors Corp. v. Bayerische Moteren Werke Aktiengesellschaft (In re FAH Liquidating Corp.), 572 B.R. 117, 124 (Bankr. D. Del. 2017) (same).

121.   In re Picard, 917 F.3d 85, 96 (2d Cir. 2019).

122.   Abitron, 600 U.S. at 418.

123.   Id. (emphasis in original).

124.   In re Fairfield Sentry Ltd., 147 F.4th 136, 155 (2d Cir. 2025).

125.   Id. (quoting Abitron, 600 U.S. at 419).

126.   Id.

127.   Picard, 917 F.3d at 99; accord Zetta, No. LA CV21-07572-JAK, 2024 LEXIS 109459, at *92; Sec. Investor, 480 B.R. at 524; In re Arcapita Bank B.S.C.(c), 575 B.R. 229, 244 (Bankr. S.D.N.Y. 2017), aff'd sub nom. In re Arcapita Bank B.S.C.(C), 640 B.R. 604 (S.D.N.Y. 2022).

128.   Picard, 917 F.3d at 99.

129.   Id.

130.   Adv. D.I. 105 at 9.

131.   Id. (citing Compl. ¶¶ 13, 21-24 (alleging that Alameda Ltd. is a British Virgin Islands company and the Binance entities are incorporated in Ireland, the Cayman Islands, and the British Virgin Islands)).

132.   For example, Plaintiffs allege in one part of the Complaint that “Alameda” made the Transfer, see e.g. Compl. ¶ 82 (listing transferor for each transfer as “Alameda”), but in another part they refer to “FTX's Alameda Research division”, id. ¶ 4 (stating that “FTX's Alameda Research division directly funded the share repurchase”), and in a third part they state that Alameda Research Ltd. made the Transfer, though some of it went through an Alameda-controlled account held in the name of Evergreen North Ltd., id. ¶ 43.

133.   Id. ¶ 32; accord id. ¶ 14.

134.   See e.g., Case No. 22-11068, D.I. 19143 at 30-35 (detailing in the Debtors’ disclosure statement, their corporate structure, lack of appropriate management and governance, control failures, lack of corporate formalities, audit functions, or reporting, and extensive commingling and misuse of funds).

135.   Although the pleading here is again somewhat imprecise, it is reasonable to infer from the allegations that funds were sent to Binance on the Binance exchange. See Compl. ¶ 43 (stating that Alameda transferred the various forms of cryptocurrency, most of which it had placed in Alameda's Binance.com accounts, “directly to one or more Binance entities”).

136.   Id. ¶ 43 & Binance Plea, Statement of Facts ¶ 1.

137.   Id.

138.   Binance Consent Order ¶¶ 18-19.

139.   Binance Plea, Statement of Facts ¶ 10.

140.   See, e.g., Picard, 917 F.3d at 99 & n.9 (determining that a transfer is domestic if the transferor debtor is a domestic entity and the debtor transferred property from United States bank accounts); In re Celsius Customer Preference Actions, No. 24-04024 (MG), D.I. 77 (Bankr. S.D.N.Y. July 29, 2025) (concluding that the transfers at issue occurred domestically because a Delaware limited liability company made the transfers and the accounts used for the transfers were domestic accounts); Maxus Liquidating Trust v. YPF S.A. (In re Maxus Energy Corp.), 641 B.R. 467, 562 (Bankr. D. Del. 2022) (allowing trustee to seek avoidance and recovery when initial debtor transferor was domestic); Sec. Investor, 480 B.R. at 524-25 (holding that the depletion of the estate occurred in the United States when the transfers at issue occurred between New York bank accounts).

141.   Some courts have examined factors beyond the location of the debtor-transferor and the transfer for their extraterritoriality analyses. For instance, in Celsius Network Ltd. v. Tether Ltd. (In re Celsius Network LLC), 671 B.R. 842, 884 (Bankr. S.D.N.Y. 2025), the court examined the alleged use of domestic intermediaries, counterparties, servers, personnel and top decision makers, bank accounts, financial institutions, and cryptocurrency exchanges. To that end, Plaintiffs have also noted that the Complaint alleges that the Transfer was made in part to repurchase shares in a domestic entity (WRS), that the necessary consideration of BUSD was minted by a New York trust following the receipt of United States dollars from Alameda, that BUSD was based on the value of the United States dollar, that transaction negotiations occurred partly in the United States, and that parties were to be noticed in the United States under the relevant agreements. Also, in Celsius and French, the courts examined the location of the property at the time of the transfer. See Celsius, 671 B.R. at 884 (noting that the situs of the cryptocurrency at the time of its transfer may have been in New Jersey where the chief executive officer of the transferor was located); French, 440 F.3d at 150 (considering the location of the real property that was transferred). Here, the parties did not argue or brief the location of the cryptocurrency or Alameda's Binance.com account at the time of the Transfer. The Court notes that the Complaint and the Binance Plea describe the Binance.com exchange as an “international” and “foreign-located” exchange, respectively. Compl. ¶ 29; Binance Plea, Statement of Facts ¶ 11. This reference in the Complaint refers to the platform's operations in multiple jurisdictions. Compl. ¶ 29. The Binance Plea does not explain the basis of its “foreign” classification. However, it notes that the exchange's servers are in Japan and that Binance is a Cayman Islands registered entity. Binance Plea, Statement of Facts ¶¶ 2, 10. To the extent these or other facts become relevant to a final decision on the location of the Transfer, the matter may be addressed following the close of discovery and more fulsome briefing.

142.   In re Quorum Health Corp., No. 20-10766, 2023 WL 2552399, at *5 (Bankr. D. Del. 2023 Mar. 16, 2023) (quoting SunEdison Litig. Tr. v. Seller Note, LLC (In re SunEdison, Inc.), 620 B.R. 505, 513 (Bankr. S.D.N.Y. 2020)) (alterations in original).

143.   11 U.S.C. § 101(22A).

144.   Case No. 22-11068, D.I. 1101 (Notice of Presentation to the Official Committee of Unsecured Creditors) at 17.

145.   11 U.S.C. § 550(a) (providing that a trustee may recover an avoided fraudulent transfer from “the initial transferee of such transfer or the entity for whose benefit such transfer was made”).

146.   Compl. ¶¶ 82, 43.

147.   ¶ 43.

148.   ¶ 45.

149.   Stanziale v. Vanguard Info-Solutions Corp. (In re Allserve Sys. Corp.), Nos. 05-60401 (MBK), 06-2208 (MBK), 2007 Bankr. LEXIS 1747, at *9 (Bankr. D.N.J. May 17, 2007) (denying motion to dismiss for failure to state a claim under § 550 where plaintiff sought to establish that defendant was initial transferee under an alter ego theory); see also Maxus Liquidating Tr. v. YPF S.A. (In re Maxus Energy Corp.), 641 B.R. 467, 510 (Bankr. D. Del. 2022) (“[T]he Court must first rule on alter ego before it can decide if Repsol was an initial or subsequent transferee.”).

150.   Compl. ¶ 43 (alleging the BUSD was sent “directly to one or more Binance entities”); id .¶ 45 (alleging the Transfer was “funded directly by Alameda to Binance”); id. ¶ 82 (listing the transferee for each of the relevant transfers as “Binance (with [Lim / Xiao] as nominal counterparty”).

151.   Adv. D.I. 106 at ¶ 22 (emphasis added).

152.   Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195, 211 (3d Cir. 2006) (“Judicial admissions are concessions in pleadings or briefs that bind the party who makes them.”); see also Parilla v. IAP Worldwide Servs. VI, Inc., 368 F.3d 269, 275 (3d Cir. 2004) (finding that the plaintiff was bound because she “expressly conceded those facts in her complaint.”).

154.   11 U.S.C. § 548(a)(1)(A); 6 Del. C. § 1304(a)(1).

155.   See, e.g., Friedman v. Wellspring Cap. Mgmt., LLC (In re SportCo Holdings, Inc.), Nos. 19-11299, 20-50554 (JKS), 2021 WL 4823513, at *14 (Bankr. D. Del. Oct. 14, 2021) (“For an actual fraudulent transfer claim to survive a motion to dismiss, the plaintiff must allege facts that, taken as true, establish direct or circumstantial evidence of intent to defraud.”); MSKP Oak Grove, LLC v. Venuto, 839 Fed. Appx. 708, 712 (3d Cir. 2020) (“Because debtors rarely admit fraudulent intent, courts must usually infer it.”).

156.   Plaintiffs also allege the presence of several badges of fraud. Kirschner v. Large S'holders (In re Tribune Co. Fraudulent Conveyance Litig.), 10 F.4th 147, 160 (2d Cir. 2021) (“To demonstrate fraudulent intent in the absence of direct evidence, claimants typically rely on ‘badges of fraud,’ i.e., circumstances so commonly associated with fraudulent transfers that their presence gives rise to an inference of intent.”). Because the Court concludes that Plaintiffs’ allegations of direct evidence of intent are sufficient, it is unnecessary to address arguments regarding the badges’ sufficiency.

157.   Compl. ¶¶ 5, 47.

158.   Alameda Research Ltd. v. Giles (In re FTX Trading Ltd.), No. 22-11068 (JTD), 2024 WL 4562675, at *9 (Bankr. D. Del. Oct. 23, 2024) (finding plaintiffs failed to sufficiently plead fraudulent intent despite theory that transaction was part of larger scheme to project a false image of profitability to the market because allegations in the complaint suggested different and legitimate purposes for the transfer).

159.   Compl. ¶¶ 4-5.

160.   Id. ¶ 4.

161.   11 U.S.C. §§ 544 & 548(a)(1)(B)(i)-(ii).

162.   Compl. ¶¶ 45-46. Defendants argue that Plaintiffs’ allegations of insolvency are directly contradicted by other allegations in the Complaint that recognize FTX's strong market presence and ability to raise capital. Given the ongoing fraud at FTX hidden from the public, these facts may be true but they do not negate Plaintiffs’ allegations of FTX's simultaneous insolvency.

163.   Id. ¶¶ 39-42. Defendants argue that FTX paid market value for the repurchased shares. This an issue of fact to be later explored.

164.   Id. ¶ 7.

165.   Id.

166.   Id.

167.   For instance, Plaintiffs claim that parts of the November 6 Tweets regarding CZ's FTT sale were false and caused them harm. But the identified false statements are not the alleged cause of harm. Plaintiffs identify CZ's expressed motives for liquidating Binance's FTT and his expressed method of selling as the false statements within the tweets. The alleged harm to FTX by the November 6 Tweets – the run on the bank – was caused, according to the Complaint's own alleged facts, by CZ's public announcement in the tweets that Binance was selling its FTT. See id. ¶ 57 (citing Ellison, who testified that CZ's “preannouncement to the market that he was going to sell his FTT” was the harmful act); id. (citing Bankman-Fried, who “observed [that] Binance ‘very publicly’ sold its FTT to ‘maximize the PR impact of it.’ ”); id. (citing an “FTX investor” who stated “All of a sudden, in social media, CZ is asking for another $500 million. He wants to do a block trade of FTT ․ He wants to convert it back to fiat. Why would you put that out there? You know it is going to push down the value of that coin dramatically, and that is exactly what happened.”); id. ¶ 59 (quoting the bankruptcy examiner who reported that CZ's “announcement that ‘Binance would be liquidating its sizeable FTT holdings ․ caused a rapid sell off of FTT.’ ”). Regardless of the falsity of his motives or method of selling, CZ's statement that is alleged to have caused FTX harm was true – he indeed sold his FTT. And while Plaintiffs state that the run on the bank would not have occurred if CZ had revealed his true motive behind his FTT liquidation, there are no alleged facts to support this conclusion leap.Furthermore, there are no facts to contradict the truth of Binance's November 10 Tweets that state Binance would not move forward with an acquisition of FTX due to corporate due diligence and the “latest news reports” regarding mishandled customer funds and alleged US agency investigations. Plaintiffs state that CZ was already made aware of the mishandled customer funds by Bankman-Fried and that they had provided him with no further due diligence at this point. However, Plaintiffs allege no facts to undermine the truth of Binance's tweet that corporate diligence (which would include diligence independent of FTX) and third-party reporting of the mishandled funds and US agency investigations factored into its determination not to move forward. It strains credulity to believe it would not.Also hard to accept as plausible is any contention that FTX reasonably relied on the Tweets and the execution of the LOI. Plaintiffs state that Bankman-Fried and CZ were long-time enemies and that Bankman-Fried and others understood that CZ wanted to destroy FTX. Accepting that as true, it explains the level of desperation Bankman-Fried was suffering from when he turned to CZ for help, but it undermines the reasonableness in relying upon any supposed promises made by CZ and Binance in that moment, let alone FTX's agreement to cease speaking with other “possible” funding sources for a 30-day due diligence period when the crisis was so acute.

168.   Official Comm. of Unsecured Creditors ex rel. Estate of Lemington Home for the Aged v. Baldwin (In re Lemington Home for the Aged), 659 F.3d 282, 292 (3d Cir. 2011) (quoting Bateman Eichler, Hill Richards, Inc., v. Berner, 472 U.S. 299, 306, 105 S. Ct. 2622, 86 L. Ed. 2d 215 (1985)).

169.   Zazzali v. Hirschler Fleischer, P.C., 482 B.R. 495, 512 (D. Del. 2012); see also Am. Int'l Grp., Inc. Consol. Derivative Litig. (“AIG”), 976 A.2d 872, 882-83 (Del. Ch. 2009). As both sides cite Delaware law in support of their arguments on this issue, the Court assumes, without deciding, that Delaware law applies.

170.   Stewart v. Wilmington Tr. SP Servs., 112 A.3d 271, 302 (Del. Ch. 2015).

171.   Plaintiffs’ assertion that the Court cannot apply the doctrine of in pari delicto on a motion to dismiss is without merit. “[B]ecause the main purpose of in pari delicto would be undermined by fact intensive proceedings comparing the culpability of the wrongdoers, the defense may be raised successfully on a motion to dismiss, unless the complaint is devoid of grounds for invoking the rule.” Stewart, 112 A.3d at 302; see also ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994) (“[A] complaint may be subject to dismissal under Rule 12(b)(6) when an affirmative defense ․ appears on its face.”); Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 360 (3d Cir. 2001) (affirming district court's dismissal of claims due to application of doctrine of in pari delicto); Collins & Aikman Corp. v. Stockman, 2010 WL 184074 (D. Del. Jan. 19, 2010), adopted by 2010 WL 1687795 (D. Del. Apr. 26, 2010) (dismissing claims based on application of in pari delicto).

172.   AIG, 976 A.2d at 877.

173.   See, e.g., Compl. ¶ 1 (“Bankman- Fried's pervasive malfeasance began long before it was discovered.”); id. ¶ 47 (“The 2021 Share Repurchase was a critical component of Bankman-Fried's pervasive fraud involving the unauthorized use of FTX customer deposits.”); id. ¶ 6 (“[T]he use of funds from the trading platform to fund the repurchase left the platform in an even greater imbalance, which Bankman-Fried attempted to cover up in a pervasive fraud that infected virtually all aspects of FTX's business.”).

174.   See, e.g., id. ¶ 1 (“FTX collapsed under the weight of the many material errors committed by its founder, Sam Bankman-Fried [ ] and other FTX insiders[.]”).

175.   Id. ¶ 49 (“[T]he customer funds deposited with FTX Trading that were secretly and unlawfully used to fund the 2021 Share Repurchase were callable by the customers at any time. At the time of the 2021 Share Repurchase, neither FTX Trading, nor Alameda, had the assets to satisfy customer withdrawal requests if all customers, or even a significant portion of them, were to demand the return of their assets at the same time because FTX had committed customer deposits, and its own assets, to risky and illiquid investments. FTX's inability to cover customer deposits in the event of such a “run on the bank” scenario became clear to the world in November 2022 when FTX collapsed, but FTX was similarly unprepared for such a scenario at the time of the 2021 Share Repurchase.”); see also id. ¶ 45 (“In part due to its ongoing fraud, at the time of the 2021 Share Repurchase, the Debtors had accrued large regulatory liabilities that were unaccounted for in the Debtors’ financial statements, including liabilities to the Internal Revenue Service and the Commodity Futures Trading Commission.”); id. ¶ 48 (“The 2021 Share Repurchase also furthered Bankman-Fried's deceptive scheme to hide the vulnerability of the exchange to a run on the institution by customers seeking to reclaim their assets deposited on the exchange. Contemporaneous communications reflect that Bankman-Fried's goal was to use the 2021 Share Repurchase to project confidence and strength to the market, concealing both the underlying insolvency and the fraudulent use of customer deposits.”).

176.   Id. ¶ 74 (“This series of false communications eliminated any possibility that FTX would obtain adequate emergency financing from any other source.”).

177.   Another fatal infirmity of the Complaint is its lack of allegations to explain or support a plausible theory of how FTX could have reasonably been saved or its value preserved before or during the time of CZ's actions. Plaintiffs simply allege the “possibility that FTX could resume and stabilize its business” with no further explanation. Id. ¶ 74 (emphasis added). There are no allegations that at any time the fraud had stopped, was going to stop, or that there existed any plausible plan for recovery, let alone one that CZ thwarted by his actions underlying the State Law Claims.

178.   Kirschner v. KPMG LLP, 938 N.E.2d 941, 950 (N.Y. 2010) (quoting Stone v. Freeman, 82 N.E.2d 571 (N.Y. 1948)).

179.   In re Indem. Ins. Corp., No. 8601-VCZ, 2019 Del. Ch. LEXIS 1460, at *9 (Del. Ch. Oct. 4, 2019) (internal quotations and citations omitted). Accord Stewart, 112 A.3d at 302 (“[T]he main purpose of in pari delicto would be undermined by fact intensive proceedings comparing the culpability of the wrongdoers ․”).

180.   R.F. Lafferty, 267 F.3d at 359 (citations omitted).

181.   Compl. ¶¶ 47-48.

182.   Hirschler Fleischer, 482 B.R. at 513 (emphasis in original); see also In re Bernard L. Madoff Inv. Sec. LLC., 721 F.3d 54, 64 (2d Cir. 2013) (describing the “adverse interest exception” as the “most narrow of exceptions” which is “reserved for cases of ‘outright theft or looting or embezzlement ․ where the fraud is committed against a corporation rather than on its behalf.’ ”) (quoting Kirschner v. KPMG LLP, 938 N.E.2d 941, 952 (N.Y. 2010)).

183.   Stewart, 112 A.3d at 309.

184.   R.F. Lafferty, 267 F.3d at 359-360 (describing the exception as applying where the agent is the sole representative of a principal but also noting that courts have applied the exception in cases where the agent dominated the corporation); see also Doe v. Bicking, C.A. No. S14C-05-026 CAK, 2020 WL 374677, at *6 (Del. Super. Ct. Jan. 22, 2020) (“[T]here is an ‘exception to the exception’ where the agent completely dominates the principal under the Sole Actor Exception. In such a case, the agent's adverse conduct is nonetheless imputed to the principal. The Sole Actor exception applies in Delaware.”).

185.   Id.

186.   Compl. ¶¶ 1, 45-48 (describing Bankman-Fried as the sole decisionmaker and ultimate authority at FTX and citing examples of Bankman-Fried's dismissal of concerns raised by others in management).

187.   Stewart, 112 A.3d at 310-11 (“The sole actor rule overrides the adverse interest exception where the principal and the agent are the same, because it is absurd to presume that the one actor involved and affected somehow could keep secrets from himself, and because the principal, as the same sole owner, benefits from the fraud.”).

188.   R.F. Lafferty, 267 F.3d at 357 (“The plain language of section 541, however, prevents courts from taking into account events that occur after the commencement of the bankruptcy case. As a result, we must evaluate the in pari delicto defense without regard to whether the Committee is an innocent successor.”); see also id. at 358 (noting that the Tenth, Second, and Sixth Circuits “have also applied the in pari delicto doctrine to bar claims of a bankruptcy trustee, standing in the shoes of a debtor, against third-parties, without regard to the trustee's status as an innocent successor”).

189.   Stewart, 112 A.3d at 302-03.

190.   Exceptions to the imputation principles set forth above include the “adverse interest exception” discussed supra. For the reasons already stated, that exception is not applicable here.

191.   AIG, 976 A.2d at 888.

192.   See e.g., Stewart, 112 A.3d at 304-05.

193.   Though this case does of course involve claims asserted under federal bankruptcy laws, Defendants raise in pari delicto only in defense of the State Law Claims.

194.   Id. at 317.

195.   Id.

KAREN B. OWENS CHIEF JUDGE