FTX User Attempts to Sue Binance and CZ for Harming Exchange
Binance and its CEO Chnagpeng Zhao are being sued for their role in the collapse of rival exchange FTX.
- A disgruntled FTX user has brought a class action lawsuit against Binance and its CEO.
- The legal action was launched on behalf of customers who lost money when the exchange went bankrupt.
- The lawsuit claims CZ’s tweets helped instigate FTX’s collapse.
- It argues that CZ and Binance acted unfairly to intentionally harm a rival exchange.
When the FTX crypto exchange collapsed in November 2022, Binance CEO Changpeng Zhao (CZ) had front-row seats to the drama. But was Zhao the architect of FTX’s demise? Or, as he has claimed, were his contributions merely the straw that broke the camel’s back?
Now, nearly a year after the events that led to the exchange declaring bankruptcy and millions of its customers losing funds, disgruntled FTX users are suing CZ. Alleging that his intentions were malicious all along, the lawsuit takes issue with CZ’s tweets in the run-up to FTX’s failure.
Class Action Alleges CZ Intentionally Hurt FTX
A class action lawsuit filed against CZ and Binance on Monday, October 2, alleges that Zhao’s tweets in the days leading up to the collapse of FTX amounted to market manipulation and were in breach of securities law. The complaint calls for a jury trial to consider its accusations.
Nir Lahav filed the suit in a California court on behalf of all investors who lost money when FTX imploded.
Alleging that Xhao intentionally undermined FTX’s business, the complaint points to a post in which he publicly declared Binance’s decision to liquidate its FTT holdings, as well as some that questioned FTX’s financial affairs.
According to the court filing, the tweet in question was misleading as Binance had already sold its FTT tokens by that point. It goes on to argue the statement was “intended to cause the price of FTT in the market to decline.”
In the days leading up to the collapse of FTX, CZ and Binance’s decision to dump FTT tokens representing 5% of the total supply was just the first intervention of many.
Binance Tried to Buy FTX
As it became clear that FTX was in trouble, Binance initially entered into negotiations to buy the struggling exchange only to pull out the next day
Although Binance blamed FTX’s internal accounting for its decision not to support the embattled exchange, the recent class action lawsuit claims that “Zhao never had a good faith intention to actually acquire FTX Entities.”
Instead, it alleges the offer was designed to hurt FTX all along.
“When an opportunity to hurt FTX Entities arose, Zhao did not hesitate to trigger the collapse of FTX Entities stock in the market,” the lawsuit states.
The complaint goes on to argue that Binance gained market share as a direct result of FTX’s bankruptcy. It therefore seeks the reimbursement of “all funds, revenues, and benefits Defendants have unjustly received because of its actions.”
CZ Resented FTX’s Regulatory Efforts, Lawsuit Claims
In accusing CZ of purposely contributing to FTX’s demise, the plaintiffs paint a picture of a cutthroat business rivalry that borders on a personal vendetta.
According to the complaint, CZ resented efforts by FTX and its founders to foster enhanced crypto regulations.
For example, it points to a tweet in which CZ states “we are not against anyone. But we won’t support people who lobby against other industry players behind their backs.”
From this, the complaint concludes that “Zhao and Binance have openly acknowledged their rivalry and animosity towards FTX Entities and its founders for their regulatory efforts.”
SBF Blames CZ for FTX Bankruptcy
The latest lawsuit against Binance and CZ echoes similar arguments made by FTX CEO Sam Bankman-Fried (SBF) in the aftermath of the group’s bankruptcy filing.
During an interview with Forbes, SBF said of CZ: “my guess is he played me.”
“I think he probably did better than he thought he would. I don’t think he thought this was going to be the outcome, I think he thought it was going to be damaging but not this damaging,” Bankman-Fried went on.
In retrospect, SBF said that he didn’t think Binance’s offer to buy out FTX was legitimate. As evidence of this, he told Forbes that CZ “cared surprisingly little about the terms” of the deal, including the price.
For his part, Zhao has always defended his role in FTX’s demise.
During a TechCrunch crypto event days after the company filed for bankruptcy, CZ said “I think we were the last straw that broke the camel’s back,” but that “it’s not a straw that is really strong.”
“There’s a whole bunch of stuff that built up to it. I just may have happened to be the last thing that pushed it,” he concluded.
