FTX, the cryptocurrency exchange that faced bankruptcy in November 2022, has taken legal action against LayerZero Labs, a company specializing in cross-chain protocol development, in a bid to recover $21 million.
The lawsuit centers on transactions that transpired between LayerZero Labs and Alameda Ventures, a venture capital arm of Alameda Research, just prior to FTX’s financial downfall.
FTX’s legal claim alleges that LayerZero Labs withdrew $21 million, potentially violating the law. The timing and legitimacy of these transactions have raised significant concerns, as they occurred between January and May 2022, shortly before FTX’s bankruptcy declaration.
Bryan Pellegrino, CEO of LayerZero Labs, is adamantly opposed to the case and points out that it is devoid of sufficient proof and is predicated on baseless claims.
Pellegrino also said that LayerZero Labs had attempted to contact FTX’s liquidators for nearly a year regarding share ownership issues but had not received a response. He speculates that FTX’s legal action might be an effort to drag out the proceedings and rack up more legal fees.
The core of the complaint revolves around an agreement that permitted Alameda Research to resell a 5% share in LayerZero valued at $150 million in exchange for LayerZero forgiving a $45 million debt.
Additionally, the lawsuit highlights an unresolved deal involving 100 million STG tokens that LayerZero had committed to repurchase at a $10 million discount but never executed. FTX alleges that LayerZero took advantage of Alameda Ventures during a liquidity crisis, orchestrating a fire-sale transaction within 24 hours.
Pellegrino vehemently denies having any insider information about the withdrawals and emphasizes that refuting this claim would be straightforward. He disclosed that he personally deposited substantial sums, including $1 million, as recently as November 7, in the month leading up to FTX’s bankruptcy.
The lawsuit between FTX and LayerZero Labs underscores the intricate legal disputes that can arise within the cryptocurrency and blockchain sectors.
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