Binance CEO had a vendetta against FTX exchange - new lawsuit alleges; SBF faces first court day
- A new class action lawsuit alleges that Binance CEO Changpeng Zhao had a vendetta against FTX exchange.
- It claims CZ “recklessly” shared information online that culminated in the collapse of FTX.
- Allegedly, the crypto executive intended to take down a competitor to “monopolize the crypto platform market.”
Binance CEO Changpeng Zhao (CZ) has been accused of having a vendetta against FTX exchange, according to a new class action lawsuit, filed on October 2. The news comes as FTX former CEO Sam Bankman-Fried (SBF) faces his first day in court scheduled for Wednesday, October 4.
Also Read: FTX founder Sam Bankman-Fried trial to begin on Wednesday, while Celsius CEO will face court in 2024
Binance CEO’s alleged vendetta against FTX
Binance CEO Changpeng Zhao, alias CZ, had a “vendetta” against FTX cryptocurrency exchange, which drove him to post misleading information about the platform, according to a new class action lawsuit filed by former FTX CEO SBF as he prepares for a much-anticipated court appearance. The court intends to hold him accountable for the collapse of his crypto empire in November 2022.
Notably, Nir Lahav’s lawyers made the filing, a California resident who also suffered exposure to FTX, with his filing flanked by those of other retail customers on FTX.
CZ’s alleged role in FTX collapse according to the lawsuit
According to the lawsuit, CZ issued “false and misleading statements” about FTX as part of a greater goal to eliminate a competitor and eventually “monopolize the cryptocurrency platform market.” With this, the lawsuit claims that CZ did not hesitate to pounce on the first opportunity to “hurt FTX entities” when it presented, first provoking the crumbling of FTX entities' stock in the market.
It started on November 6 when CZ shared with his followers on crypto X that the exchange would be liquidating its remaining FTT holdings.
As part of Binance’s exit from FTX equity last year, Binance received roughly $2.1 billion USD equivalent in cash (BUSD and FTT). Due to recent revelations that have came to light, we have decided to liquidate any remaining FTT on our books. 1/4
— CZ Binance (@cz_binance) November 6, 2022
Following this announcement, FTX token’s price plummeted sharply, with the exchange’s depositors executing a run-on, withdrawing funds from the exchange en-masse, leaving FTX exchange in a liquidity crunch that eventually prompted withdrawals freezing.
The situation worsened on November 8 when CZ committed to a non-binding letter of intent for Binance holdings to acquire FTX to salvage the exchange’s liquidity situation, but later walked away, citing “corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations” at the time. Three days later (November 11), FTX filed for Chapter 11 protection.
The lawsuit claims that CZ’s actions eventually expedited the unprecedented implosion of FTX entities, leading to the likes of Lahav and fellow retail players suffering as the platform went bankrupt. Notably, the total claims of the putative class members go above $5 million, according to the lawsuit, which described CZ's “crying emoji captioned by ‘Sad day. Tried but...’ as “crocodile tears.”
Sad day. Tried, but
— CZ Binance (@cz_binance) November 9, 2022
Specific claims featured in the lawsuit
- Binance had already sold $530 million worth of FTT a day before November 6, when it indicated that it would liquidate its FTT assets.
- Binance knew and recklessly disregarded the false and misleading nature of the information they caused to be disseminated to the investing public.
- Binance CEO never had a good faith intention to actually acquire FTX entities.
Noteworthy, this new lawsuit peddled by Lahav’s legal representatives and other investors adds to the list of legal altercations that the exchange is facing, with multiple regulatory bodies clamping down against the largest crypto exchange by trading volume and its CEO.
Cryptocurrency metrics FAQs
What is circulating supply?
The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its inception, a total of 19,445,656 BTCs have been mined, which is the circulating supply of Bitcoin. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.
What is market capitalization?
Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value. For Bitcoin, the market capitalization at the beginning of August 2023 is above $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the Bitcoin price around $29,600.
What is trading volume?
Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.
What is funding rate?
Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.
Author
Lockridge Okoth
FXStreet
Lockridge is a believer in the transformative power of crypto and the blockchain industry.
