LayerZero CEO Bryan Pellegrino, in his response to the recent FTX lawsuit alleging his cross-chain liquidity protocol of exploiting the liquidity crises at Alameda, said that the entire suit is filled with “unsubstantiated claims” and they would settle the issue in court.
Bryan Pellegrino took to the X on Monday, September 11, to tell the community that they had been trying to reach FTX bankruptcy management since the collapse to address the issue of shares ownership, but they were entertained. Instead, the FTX management has now filed a lawsuit with false claims. He blames the bankruptcy management for elongating the process to acquire more legal fees.
He said:
“We have been in communication with the FTX liquidators for almost a year now and have time and time again attempted to proactively address the issue of ownership of the shares with them and have been ignored for the entire time. To see them wait all this time to file a suit filled with unsubstantiated claims leads me to believe the purpose is not to settle the issue but simply prolong the process in hopes of receiving more legal fees.”
Regarding the FTX suit, the entire suit is filled with unsubstantiated claims. We have been in communication with the FTX liquidators for almost a year now and have time and time again attempted to proactively address the issue of ownership of the shares with them and have been…
— Bryan Pellegrino (@PrimordialAA) September 11, 2023
FTX Lawsuit Accuses LayerZero of Exploiting Crises at SBF Empire
According to a lawsuit filed on September 9, FTX seeks to recover the allegedly illegally withdrawn $21 million by LayerZero before the SBF empire’s collapse. Per the documents, these $21 million, including $5 million on November 7, were withdrawn from LayerZero’s FTX account during the ninety days (preference period) before filing for bankruptcy on November 11. The doomed cryptocurrency exchange claims that “those withdrawals constitute preferential transfers and are avoidable under Section 547 of the Bankruptcy Code.”
Regarding these withdrawals, Bryan Pellegrino said that they were unaware that FTX was insolvent at that time, and withdrawals were to cover the expenses of running the LayerZero protocol.
FTX also accused the cross-chain liquidity protocol of wrongdoings related to transactions made from January to May 2022 between Alameda Ventures, the VC arm of Alameda Research, and LayerZero. Per the court document, between January 14 and May 27, 2022, Alameda Ventures paid more than $70 million in two transactions to acquire a 4.92% stake in LayerZero.
In March 2022, Alameda Ventures further paid $25 million to purchase $100 million LayerZero’s Stargate (STG) token. Amidst these transactions, LayerZero loaned $45 million to Alameda Research under a promissory note bearing an annual interest rate of 8% on February 14.
However, when the crises at FTX Group was unfolding, LayerZero sought to exploit the crises by demanding immediate repayment of its $45 million loan to Alameda Research on November 7, 2022. During this liquidity crisis, LayerZero negotiated a fire-sale agreement with Alameda Research CEO Caroline Ellison, including the return of shares to LayerZero in exchange for the forgiveness of the $45 million loan.
Another deal related to 100 million STG tokens was also reached, in which LayerZero purchased back at a discount for $10 million on November 9. However, LayerZero did not pay for the tokens, and Alameda Ventures did not transfer the tokens.
put simply
we did indeed buy all of the tokens (back)
better is better
– RAZ & Bryan https://t.co/anBSloYRLV
— raz (@ryanzarick) November 10, 2022
After the bankruptcy, LayerZero tried to reissue these tokens to a wallet controlled by itself rather than Alameda Ventures. According to FTX liquidators, “the value that Alameda Ventures transferred to LayerZero through these last-minute pre-petition transactions far exceeded the value that LayerZero conveyed to Alameda Ventures.”
However, LayerZero’s CEO said they could not secure the private keys to the wallet in which the tokens were vested. “Ahead of the unlock, we took the initiative to reach out to FTX and work cooperatively to reissue the tokens, staying the issue of ownership,” he wrote. However, the FTX bankruptcy management refused to come to the table.
