Binance.US and Changpeng Zhao are being sued together for the collapse of FTX.
Binance.A class action complaint alleging unfair competition in relation to the demise of cryptocurrency exchange FTX has been filed against the US and Changpeng Zhao, the founder of Binance.
The case is centred on tweets that Zhao sent out at the beginning of November, just before Binance decided to sell its FTX utility tokens (FTT) holdings.
Zhao alluded to Binance’s intention to buy FTX in one of these tweets, but the company eventually changed its mind.
FTX requested our assistance this afternoon, according to Zhao’s article. “There is a serious money shortage. We signed a non-binding LOI with the intention of fully acquiring http://FTX.com and alleviating the liquidity crisis in order to protect users. In the upcoming days, we’ll be doing a comprehensive DD.
However, according to the lawsuit, Zhao openly shared this information [about the withdrawal of the takeover bid] on Twitter and other social media platforms “to hurt FTX Entities that ultimately lead to a rushed and unprecedented collapse of FTX.”
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Binance already sold a FTT
Zhao tweeted on November 6 that “Due to recent revelations… we have decided to liquidate any remaining FTT on our books,” according to the legal complaint, although Binance had already sold almost $530 million worth of FTT. Zhao’s article was meant to influence the FTT market, and as a result, the price fell 14% in a day, according to the plaintiff Nir Lahav.
According to the lawsuit, “Zhao’s tweet caused the FTT price to decrease from US 23.1510 to US 3.1468.” “This significant drop plummeted FTX Entities into bankruptcy without giving FTX Entities’ executives and board of directors an opportunity or chance [sic] to salvage the situation and put in safe guards to protect its clients and end-users.”
Following these steps, FTX entities saw a quick collapse, resulting in billion-dollar financial losses for its clients.
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Zhao Backs Up Binance
The complaint shows the two exchanges’ divergent regulatory environments. Zhao’s post included the remark that Binance wouldn’t back anyone “who lobby against other industry players behind their backs,” implying that he disagreed with FTX CEO Sam Bankman-Fried’s support for regulation initiatives in the cryptocurrency industry.
Considering all of these aspects, the plaintiffs contend that Zhao’s acts were not one-off episodes but rather a component of a larger plan to destroy FTX.
Lahav’s lawsuit asks for money damages, court costs, and the restoration of any gains obtained illegally.
Zhao has defended Binance in the open against claims of unfair competition that are mentioned in the complaint, claiming that there was no malicious intent involved. Regarding any notion that this is a move against a rival, he clarified, “It is not.
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Zhao Is to Blame for FTX’s Failure
This hasn’t, however, put an end to the ongoing speculating among cryptocurrency enthusiasts. Zhao’s post was cited in January by Sam Bankman-Fried (SBF) as the reason FTX and Alameda Research failed. Alameda became insolvent in November 2022 as a result of an intense, rapid, targeted crash that the CEO of Binance caused, the man claimed on his blog.
After the lawsuit, Sam Bankman-Fried and Zhao got into a contentious Twitter argument. The U.S. Securities and Exchange Commission (SEC) has been looking into their exchanges for suspected violations of federal securities laws. The jury selection phase of Sam Bankman-Fried’s fraud and money laundering trial is scheduled to start today in New York, while Zhao has steadfastly maintained his innocence despite regulatory scrutiny in the US.
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