Crypto News

Binance and CEO Changpeng Zhao (CZ) Face Class-Action Lawsuit Over FTX Collapse

The lawsuit alleges that Binance and CZ engaged in practices aimed at monopolizing the crypto market

A class-action lawsuit filed on October 2 in the District Court of Northern California has put Binance, Binance Holdings Limited, BAM Trading Services, BAM Management US Holdings, and their CEO, Changpeng Zhao (CZ), in the legal spotlight.

The lawsuit alleges that Binance and CZ engaged in practices aimed at monopolizing the crypto market, particularly targeting their competitor, FTX.

The lawsuit, led by California resident Nir Lahav, unravels a complex web of competitive corporate strategies, social media statements, and market consequences.

At the heart of the lawsuit are a series of tweets made by Changpeng Zhao on Twitter, particularly in the period leading up to FTX’s troubles in early November 2022.

One tweet from Zhao on November 6 plays a central role, where he stated, “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books.”

The lawsuit alleges that this tweet was misleading because Binance had already sold its FTT holdings, and it was designed to drive down the price of FTT.

The plaintiffs point to a segment of the tweet stating, “We are not against anyone… But we won’t support people who lobby against other industry players behind their backs,” as evidence of Zhao’s antagonism towards FTX CEO Sam Bankman-Fried’s regulatory efforts.

Following Zhao’s tweet, the price of FTT reportedly dropped significantly, from $23.1510 to $3.1468. The lawsuit argues that this tweet and the subsequent price drop led to the bankruptcy of FTX entities without giving them an opportunity to take protective measures.

Adding another layer to the controversy, Zhao announced on November 7th that Binance had initiated a letter of intent to acquire FTX. However, this intention was withdrawn a day later.

According to the legal filing, “Zhao publicly disseminated this information [about the withdrawal of the acquisition offer] on Twitter and other social media platforms to hurt FTX Entities, ultimately leading to a rushed and unprecedented collapse of FTX Entities.”

The lawsuit delves into various alleged violations, citing federal and California laws related to unfair competition. It seeks monetary damages, court costs, and disgorgement of ill-gotten gains across seven counts. The suit aims to represent a proposed class of potentially thousands of members.

This legal battle unfolds as both Binance and FTX face separate SEC actions, indicating broader regulatory challenges in the crypto industry. Sam Bankman-Fried, the former CEO of FTX, is scheduled to go to trial on October 4th in New York, facing criminal charges.

Furthermore, Binance US is under investigation by several US authorities, including the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Speculation persists that the US Department of Justice (DOJ) has been building a case against Binance and its founder, CZ, for over a year.

Emma Davis is a highly skilled and experienced crypto writer with a passion for all things blockchain and cryptocurrency. With years of experience writing about the latest trends, news, and innovations in the crypto world, Emma has established herself as one of the best crypto journalists.