In a significant legal development in the cryptocurrency industry, a class-action lawsuit has been filed in the Northern District Court of California against Binance.US and its CEO Changpeng Zhao. The lawsuit, filed on October 2, alleges multiple violations of federal and California laws regarding unfair competition and an attempt to monopolize the cryptocurrency market by focusing on harming rival FTX. The plaintiff behind the lawsuit is identified as California resident Nir Lahav. Here are the details…
Lawsuit against Binance and its CEO
The crux of the case hinges on a series of Twitter posts made by Changpeng Zhao, commonly known as “CZ,” in early November, just before FTX faced a dramatic collapse. On November 6, the Defendants decided to liquidate their holdings in the FTX utility token FTT. According to the plaintiffs, Binance’s holdings on FTT were estimated to be as high as 5% of the total supply. The next day, CZ made a Twitter post claiming that Binance had signed a letter of intent to acquire FTX, but reneged on the deal a day later. The lawsuit says CZ’s public dissemination of this information had a detrimental effect on FTX. He also claims that FTX led to its hasty and unprecedented collapse. The lawsuit argues that these actions were done in bad faith and played a significant role in FTX’s collapse.
Plaintiffs also take issue with CZ’s November 6 tweet, “Due to recent revelations that have come to light, we have decided to liquidate the remaining FTT on our books.” The lawsuit claims that this statement is false and misleading because Binance has already sold its FTT assets. This tweet was allegedly intended to cause a drop in the market price of FTT. More evidence for his claims is in CZ’s tweet, “We are not against anyone… But we will not support people who lobby against other industry players behind their backs.” points out the expressions. Plaintiffs interpret this as a sign that Binance is opposing the FTX CEO’s regulatory efforts.
The consequences of CZ’s actions were severe
According to the lawsuit, the consequences of CZ’s actions were severe. The price of FTT dropped from approximately $23.15 to $3.15, ultimately leading to the bankruptcy of FTX entities without giving executives and board members a chance to address the situation and protect customers and end users. The lawsuit seeks various remedies, including monetary damages, court costs, and restitution of ill-gotten gains. It is also intended to represent a proposed class of thousands of members who may have been affected by these actions.
It is worth noting that both Binance and FTX are currently facing lawsuits filed by the Securities and Exchange Commission (SEC). Additionally, the criminal trial against FTX CEO Sam Bankman-Fried will begin on October 4 in New York. In response to the allegations, CZ denied any unfair competitive motives, saying, “As for speculation about whether this was a move against a competitor, that is out of the question.”
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