Binance and CEO CZ Face Class-Action Lawsuit Alleging Conspiracy to Undermine FTX Competitor
In a surprising turn of events, California-based investor Nir Lahav, along with several others, filed a lawsuit in Northern California District Court on October 2, 2023, accusing cryptocurrency exchange Binance, its US subsidiary Binance.US, and CEO Changpeng Zhao (CZ) of engaging in unfair competition, attempting to monopolize the market, and plotting to eliminate their competitor, FTX.
The allegations stem from revelations made on CZ’s personal Twitter account just before the collapse of FTX in November 2022. This was also the time when Alameda Research, an investment fund closely associated with FTX, exposed accounting irregularities. The questionable connection between these events became the linchpin that brought down what was once a thriving empire.
On November 6, 2022, CZ publicly declared that Binance was selling off FTX’s native token, FTT, causing panic among users and initiating a rapid price decline. At that moment, Binance held up to 5% of the total FTT supply. The plaintiffs argue that this action not only caused user panic and a bank run but was also a calculated move by Binance to harm its competitor intentionally. Following CZ’s tweet, the price of FTT plummeted uncontrollably, pushing the platform closer to bankruptcy.
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
On November 8, 2022, Binance unexpectedly reached an agreement to acquire FTX but withdrew the offer just two days later. At this point, the lawsuit alleges that CZ and Binance never had genuine intentions to acquire FTX, causing significant losses to FTX users.
“Zhao publicly withdrew the acquisition offer on Twitter and other media platforms with the intent to harm FTX Entities, ultimately leading to an unprecedented and hasty collapse,” the lawsuit claims. Additionally, the CEO of Binance had previously shown reluctance to support individuals lobbying against other industry players behind their backs. The plaintiffs believe this was a veiled criticism aimed at Sam Bankman-Fried, the founder of FTX, as Sam frequently visited Washington to lobby policymakers.
Based on these allegations, the plaintiffs are resolute in their claim that Binance had a deliberate agenda to undermine its competitors to bolster its market position. Currently, the group of investors is collecting further evidence of financial losses, legal expenses, and calling on the public to join their class-action lawsuit.
In addition to this latest lawsuit, Binance has been facing legal challenges from various regulatory bodies. Since June 2023, the US Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the US Department of Justice (DOJ) have accused Binance of securities law violations. As of September 21, 2023, Binance maintains its stance that the SEC is overreaching and baseless in its allegations. Since the legal disputes erupted, trading activity on the platform has dwindled, leading to significant layoffs and the departure of numerous senior executives.
Read more:
- Changpeng Zhao Addresses Speculation Surrounding Binance.US Leadership Changes
- Binance And CEO CZ Seek Dismissal Of US Regulator’s Lawsuit
- Binance CEO Changpeng Zhao Denies $250 Million Loan Allegation Amid SEC Lawsuit
- WSJ Report: Binance And CEO Changpeng Zhao Prepare For Possible U.S. Justice Department Criminal Charges