- FTX has filed a lawsuit against LayerZero Labs, accusing the company of illegally withdrawing $21.37 million before FTX’s bankruptcy.
- The lawsuit involves claims related to transactions with Alameda Ventures and attempts to cancel agreements made prior to FTX’s collapse.
- Bryan Pellegrino, LayerZero Labs’ CEO, contests FTX’s claims, stating they are baseless, and anticipates resolution through the legal process.
Following FTX’s announcement of a lawsuit against LayerZero Labs, the platform’s CEO, Bryan Pellegrino, has taken to Twitter to respond. So, what really happened today, and how did it end up all over Twitter? Well, let’s find out.
Earlier today, FTX, a prominent cryptocurrency exchange, filed a lawsuit against LayerZero Labs. LayerZero is the company behind the cross-chain interoperability protocol LayerZero. FTX’s lawsuit alleges that the company withdrew US$21.37 million from FTX illegally before its bankruptcy.
As per FTX’s complaint, LayerZero has exploited Alameda Ventures, the venture capital arm of FTX’s sister company Alameda Research.
Apart from the US$21 million that FTX aims to recover, the platform has also made claims to cancel the agreements made before the collapse. Previously, Alameda Ventures had entered into a series of transactions with LayerZero from January to May 2022. It also included Alameda paying more than US$70 million across two transactions in order to purchase a 4.92% stake in LayerZero.
In March, Alameda Ventures acquired 100 million STG tokens for $25 million during Alameda’s public auction. STG serves as the native token for StarGate Finance, a cross-chain liquidity platform operating on LayerZero.
In February 2022, LayerZero lent $45 million to Alameda Research, featuring an 8% annual interest rate under a promissory note. When FTX faced financial issues in November 2022, LayerZero sought a deal to regain its stake from Alameda in exchange for forgiving the $45 million loan.
After the FTX collapse, another agreement was reached for LayerZero to repurchase 100 million STG tokens at a discounted price of $10 million on November 9, 2022. However, this transaction was not completed, with neither party transferring or paying for the tokens.
FTX’s filing described this as taking advantage of Alameda’s financial difficulties. FTX is also seeking the recovery of $13 million withdrawn by LayerZero’s former COO, Ari Litan, and $6.65 million by LayerZero’s subsidiary, Skip & Goose.
Bryan Pellegrino, LayerZero Labs’ co-founder and CEO, criticized FTX’s lawsuit, stating it contains baseless claims. He explained that his company has been actively addressing issues that FTX had previously ignored. FTX and its sister hedge fund, Alameda Research, filed for Chapter 11 bankruptcy protection on November 1. This move was followed by allegations of misappropriating billions of dollars in client funds and other misconduct.
Under the leadership of corporate restructuring expert John J. Ray III, FTX is attempting to manage its $3 billion crypto holdings, considering a potential revival, as reported by The Wall Street Journal in late June. FTX is also pursuing the return of payments made to celebrity endorsers and sports teams, including Shaquille O’Neal, tennis pro-Naomi Osaka, and the Miami Heat, made before its bankruptcy.
In response to these claims, Bryan Pellegrino has commented that these claims are unsubstantiated. He has asserted that there has been proactive engagement with FTX liquidators in the past, and the matter will now be settled in court.
As more crypto exchanges are settling their scores in the court, it is indeed a dark time for the crypto landscape. With investors, stakeholders, and readers watching the events unfold, it is a play that will unveiled in time.