Companies
Binance and CZ Accused of Causing FTX’s Fall
A class-action lawsuit has been filed against Binance and its CEO, Changpeng Zhao (CZ), in the Northern District of California Court on October 2nd. The plaintiff, identified as Nir Lahav, a resident of California, alleges that CZ’s actions on social media led to the collapse of their rival, FTX, last November.
The allegations in the lawsuit revolve around a series of tweets by CZ in early November, coinciding with Binance’s decision to liquidate its holdings of FTX’s utility token, FTT. In those tweets, CZ mentioned that Binance intended to acquire FTX but then withdrew the offer one day later.
Monopoly and Unfair Competition
The plaintiffs claim that CZ publicly shared this information about the withdrawal of the acquisition offer on social media to harm FTX, which, they argue, resulted in a swift collapse of FTX. They allege that this behavior by Binance and CZ goes against unfair competition laws by attempting to monopolize the cryptocurrency market and intentionally harming a competitor.
The lawsuit also points to CZ’s November 6th tweet in which he stated, “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books.” The plaintiffs argue that this statement was false and misleading since Binance had already sold its FTT holdings, and the goal was to manipulate the price of FTT in the market.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ ? Binance (@cz_binance) November 6, 2022
According to the lawsuit, the price of FTT dropped significantly, plummeting from $23.1510 to $3.1468 as a result of CZ’s tweets. This dramatic decrease allegedly led to FTX’s bankruptcy without affording FTX’s management team the opportunity to take measures to protect its clients and users.
The lawsuit demands monetary damages, legal costs, and the disgorgement of ill-gotten gains based on seven specific charges. Additionally, the plaintiff believes there are thousands of members in the proposed class.
