FTX filed a lawsuit against LayerZero, demanding the return of $86 million


FTX filed a lawsuit against the developer of the omnichain protocol, LayerZero Labs, demanding the return of $86 million.

The plaintiff intends to seek the reversal of a series of $45 million transactions concluded by former platform executives on the eve of the company’s bankruptcy.

The claim relates to a deal between ex-Alameda Research CEO Caroline Ellison and Layer Zero Labs on November 7, 2022 – four days before the restructuring filing.

According to the agreement, the market maker agreed to sell back its 5% stake in the infrastructure project – valued at $150 million at current valuation – in exchange for LayerZero Labs’ willingness to forgive a $45 million loan it provided to Alameda.

According to the lawsuit, the FTX group was already insolvent at that time. For this reason, under the Bankruptcy Code, the transactions constitute fraud and must be set aside and the property included in the bankruptcy estate.

The claims also relate to the transaction of the market maker selling its 100 million Stargate (SG) utility tokens to LayerZero for $10 million. Alameda spent $25 million for these purposes.

The transaction was not completed despite attempts by LayerZero Labs to gain control of the tokens.

The lawsuit states that the firm attempted to reissue the assets and move them to its wallet, but abandoned the intention due to the threat of legal action from FTX.

Also among the platform’s requirements for LayerZero is the return of $40 million withdrawn by the latter and former COO Ari Litan from the accounts of the exchange and its American division 90 days before filing for bankruptcy.

During this period, the infrastructure firm transferred $21 million from the FTX.com account, with ~$16 million of this amount transacted before the platform’s problems became widely known.

The company withdrew the remaining $5 million on Nov. 7, the same day LayerZero withdrew its loan, the lawsuit says.

Also in the document, Litan himself and the Skip & Goose organization associated with him appear as defendants. The exchange challenged the withdrawal of $19.6 million by this structure a few days before filing for bankruptcy.

According to the plaintiff, the two companies once had a close relationship: FTX Group once arranged “several months of residency in the Bahamas for LayerZero employees” and also invited the latter to Super Bowl parties and Miami Heat playoff games.

Alameda Ventures first invested in the omnichain protocol team in January 2022.

Co-founder and CEO of LayerZero Labs Brian Pellegrino called the claims “unfounded”. The executive said the firm actively tried to resolve the issue of ownership of its shares with FTX liquidators, but was ignored.

“This leads me to believe that the goal is not to settle the problem, but simply to prolong the process in the hope of collecting more legal fees.” – the top manager pointed out.

In the message, Pellegrino said the withdrawal was used by the firm to finance standard operations and “not in some panic to seize assets based on asymmetric information.”

“We had no way of knowing whether FTX was insolvent at the time,” – he emphasized.

In June 2023, the platform’s current management team said it had returned approximately $7 billion in liquid assets.

In May, FTX filed a lawsuit against Genesis demanding the return of $3.9 billion. Subsequently, the volume of claims was reduced to $2 billion. As a result, the companies agreed to pay $175 million in favor of Alameda Research.

In September, the court approved the buyout by online broker Robinhood to buy back its 55 million shares worth $605.7 million, which previously belonged to the founder of the exchange, Sam Bankman-Fried.

Recall that in August, FTX reported to the court about plans to hire Galaxy Digital to sell assets worth $3 billion.

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