Binance faces class action lawsuit over FTX crash

CFTC Files Suit Against Binance and Changpeng Zhao
CFTC Files Suit Against Binance and Changpeng Zhao

California investor Nir Lahav has filed a class-action lawsuit against Binance and its CEO Changpeng Zhao, alleging unfair competition against the collapsed exchange FTX.

The plaintiff believes that the defendants tried to monopolize the market by harming FTX and its affiliated platforms.

We are talking about tweets published by Zhao in early November 2022. In one of the threads, the head of Binance announced the decision to liquidate the company’s assets in FTT. Lahav estimated that this represented up to 5% of the FTX utility token supply.

Next, the head of Binance announced a strategic partnership with a competitor, which involved a possible takeover of the platform.

But on November 10, Binance abandoned the purchase of FTX, citing the results of its due diligence and negative news reports.

“Zhao publicly spread this information on Twitter and other social networks to harm businesses [группы] FTX, which ultimately led to the rapid and unprecedented collapse of the holding,” the plaintiff said.

He argued that Zhao’s November 6 post about his intention to liquidate Binance’s FTT holdings was misleading because the exchange had already sold the tokens. The publication was intended to cause the market price of FTT to fall, Lahav believes.

He believes that Binance’s actions against FTX were caused by “regulatory efforts” by the head of the rival exchange, Sam Bankman-Fried. As evidence, Lahav cited Zhao’s post explaining the reasons for the decision:

“Liquidating our FTTs is just about managing exit risks, which is what LUNA taught us. […] We are not against anyone. But let’s not support people who lobby against other industry players behind their backs.”

The lawsuit alleges that Binance’s offer to purchase FTX was made in bad faith and “ultimately” led to the latter’s collapse:

“Zhao’s tweet caused the FTT price to drop from $23.151 to $3.1468. This significant decline forced FTX into bankruptcy without giving management the ability or chance to salvage the situation and take action to protect its customers and end users.”

Lahav demanded that the defendants pay damages, pay legal fees and return ill-gotten gains on seven counts. In his opinion, “thousands of participants” could join the lawsuit.

Recall that in June, the US Securities and Exchange Commission sued Binance, bringing forward 13 charges.

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