Binance CEO Changpeng Zhao Faces Class-Action Lawsuit Over Alleged Market Monopolization Attempts
Summary:
Changpeng Zhao, CEO of Binance.US, has been hit with a class-action lawsuit alleging his attempt to monopolise the crypto market by undermining competitor FTX, violating federal and California competition laws. Instigated by a resident of California, Nir Lahav, the lawsuit scrutinizes various Twitter posts by Zhao published in the leadup to FTX's collapse. It criticises Binance's sale of its 5% holdings in FTX's FTT tokens on November 6, just before the tumble. Following the sell-off, Zhao tweeted about a withdrawn acquisition deal with FTX, which the lawsuit alleges was intended to destabilize the platform. The suit seeks damages, legal costs and confiscation of unfair earnings obtained through these alleged actions.
On October 2, Changpeng Zhao, CEO of Binance.US, was hit by a class-action lawsuit in Northern California's District Court. The lawsuit, lodged by a California individual named Nir Lahav, alleges that Binance and its CEO tried to monopolise the cryptocurrency market and undermine competitor FTX, breaching both federal and Californian competition legislation. The lawsuit highlights Zhao's various Twitter posts from early November, prior to FTX's downslide. The posts correlate with Binance's decision to sell its investment in FTX's FTT tokens - believed to be up to 5% of all FTT tokens - on November 6.
Subsequent to the sell-off, Zhao expressed on Twitter that Binance had intended to take over FTX, only to retract the decision a day after. The lawsuit alleges that Zhao publicly disclosed the withdrawal of the acquisition deal across social media with the intention of destabilizing FTX, leading to the platform's swift and unusual downfall.
The lawsuit opens by defending the Securities and Exchange Commission's cryptocurrency regulation strategy and invoking historical Supreme Court rulings like the Howey and Reves decisions. As per the lawsuit, as part of Binance's disinvestment from FTX last year, Binance received around $2.1 billion cash equivalent (BUSD and FTT). However, the lawsuit advances that Zhao's November 6th tweet about the liquidation of Binance's FTT assets was false and designed to depress the market price of FTT, as Binance had already unloaded its FTT holdings.
According to the plaintiffs, evidence of this malicious intention was found in another part of Zhao's post where he states that Binance would not back those who lobby against other industry participants clandestinely. They interpret this statement as Binance's disapproval of FTX CEO Sam Bankman-Fried's regulatory lobbying.
Furthermore, the lawsuit argues that Zhao's FTT takeover offer wasn't genuine and was effectively a set-up for FTX's collapse. The suit states that Zhao's tweet led to FTX's FTT token price decreasing dramatically, pushing FTX into bankruptcy without giving the company's leadership an opportunity to address the crisis and take protective measures for their clients.
The lawsuit seeks compensation for damages, legal expenses and confiscation of ill-gotten gains, with the claimant confident about the potential for thousands of people joining the class action.
The legal action acknowledges Binance and FTX are both currently facing SEC lawsuits. The court proceedings against Bankman-Fried commence on October 4 in New York. In one of the same tweets cited in the lawsuit, Zhao denied the claims of anti-competitive behaviour, though this hasn't quelled industry speculation. The heads of the two cryptocurrency exchanges proceeded to exchange barbed comments on Twitter for weeks following the incident.
Published At
10/2/2023 9:55:41 PM
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