DLC FTX Estate Sues Layerzero Labs for $85M in Alleged Fraud Case -

FTX Estate Sues Layerzero Labs for $85M in Alleged Fraud Case

FTX Estate Files $85 Million Lawsuit Against Layerzero Labs Amidst Bankruptcy Controversy

A stunning turn of events, the bankrupt estate of the cryptocurrency exchange FTX has taken legal action against blockchain company Layerzero Labs, alleging fraudulent deals and asset withdrawals totaling $85 million. The lawsuit comes in the wake of FTX’s bankruptcy filing and a web of complex financial maneuvers that have raised eyebrows in the crypto world.

The Allegations

FTX’s lawsuit claims that Layerzero Labs took advantage of FTX’s financial distress in the days leading up to its bankruptcy filing. Specifically, the lawsuit alleges the following:

1. Fraudulent Transfers FTX accuses Layerzero of orchestrating fraudulent transfers, including a $45 million deal and alleged cryptocurrency withdrawals exceeding $40 million from FTX by Layerzero employees. These transactions, according to FTX, were made to conceal assets from creditors.

2. Fire-sale Transaction In November 2022, as FTX faced a severe liquidity crisis, Layerzero reportedly demanded immediate repayment of a $45 million loan to FTX subsidiary Alameda Ventures. Layerzero then negotiated a deal where Alameda Ventures transferred its nearly $150 million equity stake in Layerzero in exchange for forgiving the loan. FTX contends that this transaction was conducted with ulterior motives.

3. Insider Exploitation FTX claims that Layerzero employees, including former Chief Operating Officer Ari Litan, withdrew over $40 million worth of assets from FTX exchange accounts in violation of bankruptcy preference laws. These withdrawals occurred on November 7 and 8, 2022, just days before FTX halted customer withdrawals.

FTX’s Perspective

FTX argues that Layerzero had inside knowledge of FTX’s financial troubles and used this information to its advantage. They assert that these actions were aimed at benefiting Layerzero at the expense of FTX and its creditors.

Legal Action

In response to these allegations, FTX’s lawsuit seeks to:

– Recover the alleged fraudulent transfers and improper withdrawals.
– Disallow claims filed by Layerzero against the FTX bankruptcy estate, asserting that Layerzero violated the automatic stay by attempting to take control of crypto tokens post-bankruptcy.

Layerzero’s Response

Layerzero Labs’ CEO, Bryan Pellegrino, vehemently denies the allegations. He claims that Layerzero has been in communication with FTX liquidators for almost a year, attempting to address the ownership issue of shares. Pellegrino contends that the lawsuit is filled with “unsubstantiated claims” and suggests that it may be an attempt to prolong the legal process for financial gain.

As this legal battle unfolds, it sheds light on the complexities and controversies surrounding cryptocurrency exchanges and their interactions with blockchain companies. The crypto community will be watching closely as both parties present their cases, seeking resolution and clarity in this high-stakes dispute.

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