TL;DR Breakdown
- FTX, a bankrupt cryptocurrency exchange, has sued LayerZero Labs to recover $21 million, alleging illicit withdrawals made just before FTX’s bankruptcy. The lawsuit also involves transactions with Alameda Ventures and focuses on a deal allowing Alameda Research to sell back a 5% stake in LayerZero.
- Bryan Pellegrino, CEO of LayerZero Labs, refutes the lawsuit’s claims, stating they are unsubstantiated. He suggests that FTX is prolonging the legal process to accumulate more legal fees. LayerZero had been trying to address share ownership issues with FTX’s liquidators for nearly a year.
- The lawsuit is part of a series of legal actions by FTX to recover lost funds. It follows a previous lawsuit by FTX to recover more than $320 million spent on acquiring Digital Assets AG. Both FTX and LayerZero are preparing for a protracted legal battle.
Description
Bankrupt cryptocurrency exchange FTX has filed a lawsuit against LayerZero Labs, a cross-chain protocol company, seeking to recover $21 million. The lawsuit alleges that LayerZero Labs illegally withdrew these funds just before FTX’s bankruptcy declaration in November. The case stems from transactions between Alameda Ventures, the venture capital arm of FTX’s sister company Alameda Research, … Read more
Bankrupt cryptocurrency exchange FTX has filed a lawsuit against LayerZero Labs, a cross-chain protocol company, seeking to recover $21 million. The lawsuit alleges that LayerZero Labs illegally withdrew these funds just before FTX’s bankruptcy declaration in November. The case stems from transactions between Alameda Ventures, the venture capital arm of FTX’s sister company Alameda Research, and LayerZero Labs that took place from January to May 2022.
LayerZero CEO refutes claims
Bryan Pellegrino, CEO of LayerZero Labs, has countered the lawsuit in a post on X (formally Twitter), stating that it is filled with unsubstantiated claims. Pellegrino also claimed that LayerZero Labs has been trying to address the issue of share ownership with FTX’s liquidators for nearly a year but has been ignored. He believes the lawsuit aims to prolong the legal process to accumulate more legal fees.
The lawsuit focuses on a deal that allowed Alameda Research to sell back a 5% stake in LayerZero, valued at $150 million, in exchange for LayerZero forgiving a $45 million loan. The lawsuit also highlights an incomplete transaction related to 100 million STG tokens, which LayerZero agreed to buy back at a discounted rate of $10 million but never completed. FTX alleges that LayerZero exploited Alameda Ventures during a liquidity crisis, negotiating a fire-sale transaction within 24 hours.
In his statement on X, Pellegrino also disputed the claim of preferential information around the withdrawals. He pointed out that this claim can be easily proven false. He mentioned that he was personally depositing millions in the month leading up to bankruptcy, including $1 million as late as November 7th.
FTX is also seeking to recover $13.07 million from Ari Litan, LayerZero’s former COO, and $6.65 million from a subsidiary, Skip & Goose. The lawsuit claims that LayerZero staff, their families, and even their dogs were hosted by FTX in the Bahamas for several months, indicating close ties between the two firms.
This lawsuit is part of a series of legal actions initiated by FTX in recent months to recover funds lost in various transactions made by its subsidiaries before its collapse. The exchange previously filed a lawsuit to recover more than $320 million spent on the acquisition of Digital Assets AG, a Swiss startup.
The legal battle between FTX and LayerZero Labs is set to take another dimension. Both parties are gearing up for a protracted legal fight, with FTX aiming to recover $21 million amid its bankruptcy proceedings and LayerZero Labs defending against what it claims are baseless allegations.
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