FTX Management Sues LayerZero Labs Over Questionable Deal with Former Executives
The management of FTX has filed a lawsuit against LayerZero Labs, the protocol developers, in an attempt to cancel trades made by former executives of the bankrupt firm. The lawsuit focuses on a deal that took place on November 7, 2022, between Caroline Ellison, the former head of Alameda Research, and LayerZero Labs, just four days before FTX declared bankruptcy.
The deal involved Alameda selling its 5% stake in LayerZero for $150 million and having its $45 million loan forgiven by LayerZero. FTX’s new management claims that the Sam Bankman-Fried empire was already insolvent at the time of the deal and that it should be considered fraudulent and nullified.
Additionally, the lawsuit highlights a failed deal between Alameda and LayerZero, where Alameda was supposed to sell 100 million of its Stargate tokens (STG) to LayerZero for $10 million. The document also reveals the close ties between FTX and LayerZero in the past.
LayerZero CEO Responds to Lawsuit
In response to the lawsuit, LayerZero Labs CEO Brian Pellegrino stated that the document contained baseless allegations. He mentioned that his company had been trying to resolve the ownership issue of its shares with FTX liquidators for nearly a year, but their attempts were ignored. Pellegrino provided evidence of his personal deposits, including $1 million on November 7th, to counter the claim of preferential information around the withdrawals.
FTX’s Bankruptcy and Misuse of Funds
In November 2022, FTX filed for bankruptcy and halted fund withdrawals, citing liquidity problems. However, it was later revealed that Sam Bankman-Fried had been using clients’ money for personal investments without authorization. This resulted in billions of dollars in losses for over 9 million users. The former management of FTX was able to withdraw over $3 billion through Alameda Research before the exchange collapsed, with Bankman-Fried transferring $2.2 billion into his own account.
Hot Take: FTX Management Fights Back Against LayerZero Labs in Lawsuit
The legal battle between FTX and LayerZero Labs continues as FTX’s management seeks to nullify trades made by former executives. The allegations of fraud surrounding the deal between Alameda Research and LayerZero Labs bring into question the financial state of the Sam Bankman-Fried empire at the time of FTX’s bankruptcy. LayerZero Labs’ CEO, Brian Pellegrino, denies the allegations and asserts that his company has been ignored in its attempts to resolve ownership issues with FTX. This lawsuit sheds light on the misuse of funds by Bankman-Fried and the significant losses suffered by FTX users. The outcome of this legal dispute could have far-reaching implications for the cryptocurrency industry.
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