A class action lawsuit has been filed against cryptocurrency exchange Binance.US and its founder Changpeng Zhao (CZ) for purportedly violating competition laws and intentionally causing financial harm to now-bankrupt rival FTX.
The case was brought by California resident Nir Laav in the Northern California District Court on October 3, 2022. It alleges Binance acted anti-competitively to undermine and acquire FTX amid its implosion last November.
Lawsuit Claims CZ Tweets Caused FTX Collapse
According to the lawsuit, CZ made public statements on November 6 about Binance’s intent to liquidate its FTX Token (FTT) reserves with the deliberate aim of cratering FTT’s price.
The suit asserts CZ’s tweets were false pretenses since Binance had already sold its FTT holdings by then. The comments allegedly caused FTT to plunge from $22 to $3 rapidly.
Laav claims CZ deliberately spread misinformation to “hurt FTX entities” and engineer the rushed bankruptcy filing that locked out users’ funds. The suit seeks to recover clients’ lost deposits.
Binance has rejected accusations that its actions exacerbated FTX’s meltdown, arguing it was responding prudently to minimize its own risks.
Alleges Anti-Competitive Conduct
More broadly, the lawsuit characterizes steps by Binance and CZ last fall as unfair competitive behavior aimed at dominating the crypto industry by forcefully removing its closest rival FTX.
It states that “Binance sought to weaponize its position to take out Mr. Bankman-Fried and the competitive threat he posed.”
As regulators also probe potential misconduct related to FTX’s failure, litigation attempts to establish liability around Binance’s alleged contributing role. But convincing courts of illegal anti-competitive intent may prove challenging.
The lawsuit comes as Binance itself faces worldwide regulatory scrutiny, including potential action from the US Justice Department, according to recent reports. The CZ suit threatens to compound Binance’s compliance troubles as it combats multiple legal fronts.