- An investor has filed a class-action suit against Binance and its CEO for their alleged role in the collapse of FTX.
- The case was filed on October, 2nd in California by a single plaintiff against Binance and Changpeng Zhao.
- The plaintiff would have to prove that the allegations triggered the collapse of FTX or there were other dynamics.
A California-based investor is suing Binance and its CEO Changpeng Zhao for comments from last November, which, it is claimed, caused the FTX crypto exchange to go down.
Binance.US and its CEO are the target of a class action lawsuit, they were sued on October 2 in the Northern California District Court for alleged breaches of federal and state laws on unfair competition for allegedly trying to control the cryptocurrency industry by damaging rival FTX.
The lawsuit was filed by Nir Lahav, a California resident who is listed as the only plaintiff
The popular post
The posts Zhao made in early November, just before FTX collapsed, on Twitter (now X), are at issue. The posts were made in connection with the defendants’ decision to sell all of their FTT (FTT) utility token holdings on November 6. According to the plaintiffs, Binance may have held up to 5% of all FTT tokens.
The series of posts were made on November 6th, 2022 from Changpeng Zhao’s official X handle with over 8 million followers.
The post mentioned that as part of Binance’s exit from FTX equity the previous year, Binance had received roughly USD 2.1 billion equivalent in cash (BUSD and FTT). They further went on to say due to new information in their possession, they were liquidating any remaining FTT (FTT is the native cryptocurrency token of the crypto derivatives trading platform FTX that launched on May 8, 2019).
They went on to say they were going to do so in a way that would minimise market impact, further clarifying that it was not a move against a competitor. They defended themselves by stating that the crypto industry was in its infancy and that every time a project failed publicly it hurt every user and every platform
They completed the post by stating that typically hold tokens for the long term and that they had held onto the tokens for a long time
The plaintiff argument
The plaintiff argues that the sentence made by Binance to the effect that it had decided to liquidate all its holdings from FTX was misleading since it had already sold off its holdings and that the post was intended to cause a panic exit that would eventually lead to the prices of FTT in the market to fall.
The plaintiff argues:
“Zhao’s tweet resulted in FTT price declining from US 23.1510 to US 3.1468. This significant drop plummeted FTX Entities into bankruptcy without giving an opportunity or chance to FTX Entities’ executives and board of directors a chance [sic] to salvage the situation and put in safeguards to protect its clients and end-users”.
After the tweet, the CEOs of both crypto firms; FTX and Binance exchanged jibes for a period of time with Changpeng or ‘ CZ’ as he is popularly known, calling the then CEO of FTX Sam Bankman-Fried (SBF) a fraudster. This elicited a response from SBF who mentioned that Binance had reached a “strategic transaction” with CZ but Binance pulled out after reviewing the exchange’s balance sheet. He criticised CZ for threatening to walk at the last minute without an additional $75 million. In the end according to SBF, CZ won because they had to buy him out.
According to the plaintiff, the decision to acquire FTX by Binance.US was not made in good faith, and it eventually led to the collapse of the crypto firm.
The plaintiff wants the defendant to pay monetary damages, and court cases and for them to be forced to pay back the ill-gotten wealth.