FTX Faces Multimillion-Dollar Lawsuit Over Deals with LayerZero
In a recent lawsuit filed on September 8th, FTX, a prominent cryptocurrency exchange, is claiming that the deals it made with LayerZero, a now defunct company, were unfair and potentially fraudulent. FTX argues that these deals were made when LayerZero was already insolvent. However, it’s worth noting that the deals were agreed upon before LayerZero officially filed for bankruptcy on November 7th, 2022.
According to FTX’s lawyers, Alameda CEO Caroline Ellison exchanged FTX Empire’s 5% stake in LayerZero, which is currently valued at $150 million, in return for loan forgiveness of LayerZero’s $45 million loan to Alameda. FTX’s lawyers argue that since FTX was already insolvent at the time, this exchange could be considered an act of fraud.
The lawsuit also mentions that LayerZero withdrew $21 million from its FTX account, with $16 million being withdrawn before FTX showed signs of instability. Additionally, FTX paid $25 million to LayerZero for 100 million Stargate (STG) tokens earlier in the year. To avoid a collapse, Alameda sold these tokens back to LayerZero for $10 million.
In response to the lawsuit, LayerZero’s CEO, Bryan Pellegrino, took to social media to defend his company. He stated that LayerZero has been in communication with FTX liquidators since the beginning and has made multiple attempts to resolve the issues. Pellegrino expressed doubts about FTX’s intentions, suggesting that they are looking to prolong the legal process to accumulate more legal fees.
Regarding the withdrawals and the Stargate tokens, Pellegrino argued that they were routine transactions related to LayerZero’s day-to-day operations. He also mentioned a dispute over the private keys to the wallet containing the Stargate tokens, stating that LayerZero attempted to repurchase the tokens but was denied by FTX.
Pellegrino concluded by expressing his disappointment with FTX’s actions and emphasized his willingness to resolve the matter in court.
This lawsuit adds to the series of legal battles FTX has been involved in over the past year. The exchange has been actively seeking to recover funds spent without justification or in subprime deals. With LayerZero, FTX aims to hold the company accountable for their alleged unfair deals. The outcome of this lawsuit will likely have significant implications for the cryptocurrency industry and its future business partnerships.
Sources:
– FTX Lawsuit: [source](https://restructuring.ra.kroll.com/FTX/Home-DownloadPDF?id1=MjUxNzE5MQ==&id2=-1)
– FTX Attempts Clawback of $700M Allegedly Spent After a Networking Party: [source](https://cryptopotato.com/ftx-attempts-clawback-of-700m-allegedly-spent-after-a-networking-party/)
– Bryan Pellegrino’s Twitter Statement: [source](https://twitter.com/PrimordialAA/status/1701049609953464433?ref_src=twsrc%5Etfw)
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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