Cryptocurrency exchange Binance is facing legal heat over accusations of its involvement in the collapse of bankrupt cryptocurrency exchange FTX. Nir Lahav, a California resident, has launched a class action lawsuit accusing Binance of deliberately setting FTX up in a bid to dominate the exchange market.
This legal action, initiated on October 2nd, targets Binance.US and its CEO, Changpeng Zhao, also known as CZ, and asserts claims of unfair competition while citing numerous violations of both federal and California laws. The lawsuit revolves around the alleged efforts to undermine FTX’s position in the market by Binance.
Zhao’s Tweets From a Year ago Resurface
Plaintiffs allege that Zhao took to Twitter last November 6th, prior to FTX’s collapse, with misleading statements. In his tweet, CZ announced Binance’s intention to divest its holdings of FTX’s utility token, FTT. The lawsuit contends that this announcement was made with malicious intent, designed to unsettle the FTT marketplace. However, according to the plaintiff, Binance had already sold off its FTT holdings well before this announcement.
Zhao also declared that there would be no support for individuals engaged in lobbying against industry players. Plaintiffs argue that this statement appeared to be a direct critique of FTX’s Bankman-Fried and his regulatory initiatives.
Plaintiffs Assert Zhao’s Actions Were Deliberate
The lawsuit maps out a picture of a meticulously designed plan by Binance’s CEO, Changpeng Zhao, rather than impulsive actions. According to the plaintiff, Zhao’s end goal was to disrupt FTX, a strategy that seemed to have worked out in the aftermath of the former industry giant’s collapse. This collapse resulted in FTT, the company’s token, plummeting from an all-time high of $23.1510 to a mere $3.15, rendering the company financially bankrupt and in a state of disarray.
Consequently, the lawsuit is pursuing monetary compensation, coverage of legal costs, and the repayment of allegedly ill-gotten gains amassed through multiple charges. The class action anticipates the participation of thousands of affected parties.
SEC Cracks Down on Binance and FTX
Both Binance and FTX are deep in distinct legal disputes with the Securities and Exchange Commission (SEC). Binance is currently under the Securities watchdog’s scrutiny due to concerns surrounding loopholes in the company’s regulatory framework.
Concurrently, the criminal trial of Sam Bankman-Fried is scheduled to commence on October 4th in New York. During his earlier court appearance, he tendered a plea of not guilty, deciding to push the blame for the company’s downfall on the former CEO of Alameda Research and his ex-girlfriend, Caroline Ellison. The trial covers seven criminal charges, with a second trial planned for the following year.
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