Binance Faces Class-Action Suit Over FTX Collapse

Summary

• A class-action lawsuit has been filed against Binance and its CEO, Changpeng Zhao, alleging unfair competition and harm to cryptocurrency exchange FTX.
• The lawsuit alleges that Zhao's tweets in November 2022 caused a rapid collapse of FTX Entities, resulting in a significant drop in the FTX utility token's price and leading FTX Entities into bankruptcy.

California resident sues Binance

A class-action lawsuit has been filed against Binance and its CEO, Changpeng Zhao, in California, alleging unfair competition and harm to cryptocurrency exchange FTX. The suit, brought by California resident Nir Lahav, centers on tweets by Zhao last November. These tweets coincided with Binance's decision to liquidate its FTX utility token holdings, leading to allegations of intentional harm.

In one tweet, Zhao mentioned Binance's intent to acquire FTX but later backed out of the deal. The lawsuit claims that this tweet, along with subsequent posts, caused a rapid collapse of FTX Entities. According to the lawsuit, this collapse resulted in a significant drop in the FTX utility token's price, leading FTX Entities into bankruptcy.

The lawsuit demands monetary damages, court costs, and disgorgement of ill-gotten gains. Binance and FTX are both currently facing SEC actions, with a criminal case against FTX's CEO, Sam Bankman-Fried, scheduled for October 4th in New York.

In January, Sam Bankman-Fried (SBF) pinned the blame for the spectacular collapse of his FTX and Alameda Research empire on CZ for his tweet. The CEOs of both exchanges engaged in a heated exchange on Twitter in the aftermath of the lawsuit.

Despite denying accusations of unfair competition, the Binance CEO and his exchange have faced constant negative attention ever since.