Binance.US and its CEO, Changpeng Zhao, have been sued by a resident of California for allegedly sabotaging the FTX Exchange. The accusations against the platform extend to Binance engaging in unfair competition along with multiple endeavors in monopolizing the crypto market. Furthermore, the resident claimed that these initiatives were taken with hopes of undermining the FTX exchange and paving the way for its crash. The current legal development refers to the tweets made by Zhao during the time of the FTX collapse.
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
These posts were made in accordance with the decision by the defendants to liquidate all of their holdings into the FTX utility token, FTT. At the same time, the plaintiffs believed that Binance owned up to a total of 5% of all FTT tokens. Just a day after that, Zhao mentioned that Binance made the decision to sign a letter of intent in an effort to acquire FTX, but the leading cryptocurrency exchange eventually backed out from the deal.
The recent filing claims that the CEO of Binance intentionally disseminated this information on X along with other social media platforms to hurt FTX entities. This eventually led to the collapse of these FTX entities.
Binance Joins FTX in Legal Crosshairs
People were quick to highlight that Zhao’s claims of liquidating all FTT tokens on Binance’s books were entirely false and misleading as the platform had already sold the entirety of its FTT holdings. It is also believed that this post was made to cause the price of FTT to decline. Furthermore, the suit alleges that Zhao’s proposal to buy FTX was not made in good faith.
As per the lawsuit,
“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 safe guards to protect its clients and end-users.”
The suit demanded monetary damages, along with court costs and disgorgement of ill-gotten gains on a series of seven counts. According to the suit, both Binance and FTX are currently subject to actions by the SEC. SBF’s criminal trial is set to begin on October 4 this year, with Zhao addressing potential accusations of unfair competition.
In an identical development, Paradigm, a crypto venture capital firm has criticized the SEC for bypassing its rule-making process in its ongoing legal battle against Binance. The platform even went as far as accusing the regulator of crossing its jurisdiction.