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Reading: FTX, the Bankrupt Crypto Exchange, Sues LayerZero Labs to Reverse $45 Million Deal
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COINTURK NEWS > Cryptocurrency Exchanges > FTX, the Bankrupt Crypto Exchange, Sues LayerZero Labs to Reverse $45 Million Deal
Cryptocurrency Exchanges

FTX, the Bankrupt Crypto Exchange, Sues LayerZero Labs to Reverse $45 Million Deal

In Brief

  • The newly appointed management team of FTX, the cryptocurrency exchange planning to reopen amidst bankruptcy, has filed a lawsuit against LayerZero Labs, a blockchain infrastructure company, to reverse a $45 million deal made in the midst of bankruptcy. The crypto exchange also requested the return of over $40 million withdrawn from LayerZero Labs and the […]
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The newly appointed management team of FTX, the cryptocurrency exchange planning to reopen amidst bankruptcy, has filed a lawsuit against LayerZero Labs, a blockchain infrastructure company, to reverse a $45 million deal made in the midst of bankruptcy. The crypto exchange also requested the return of over $40 million withdrawn from LayerZero Labs and the former COO’s FTX accounts within the 90 days prior to the bankruptcy.

Contents
New FTX Management Demands Cancellation of the DealClose Relationship Between FTX and LayerZero Labs

New FTX Management Demands Cancellation of the Deal

FTX, led by CEO John Ray III, filed a lawsuit against LayerZero Labs, the founder of an interchain swap protocol, to nullify a series of agreements made by former FTX executives on the eve of the exchange’s bankruptcy. The lawsuit primarily targets an agreement made between LayerZero Labs and Caroline Ellison, the former CEO of Alameda Research, on November 7, 2022, four days before the bankruptcy filing.

As part of the agreement, Alameda Research agreed to repurchase its 5% stake in LayerZero Labs (valued at $150 million according to LayerZero Labs’ current valuation) in exchange for erasing the $45 million credit it had extended to LayerZero. The lawsuit argues that the agreements are not valid under bankruptcy law due to FTX’s bankruptcy at the time of the transfers and should be cancelled in the best interest of the bankruptcy process.

Additionally, as part of the agreement, Alameda Research had agreed to repurchase 100 million Stargate (STG) tokens from LayerZero Labs for $10 million. The company had paid $25 million for the tokens earlier that year. The lawsuit highlights that despite LayerZero Labs’ efforts to regain control of the tokens by reissuing them to a wallet controlled by the company, the transfer was not completed before FTX halted the agreement due to the threat of litigation.

Close Relationship Between FTX and LayerZero Labs

Details presented in the lawsuit reveal a close relationship between FTX and LayerZero Labs at one point. According to the evidence provided, FTX arranged accommodations in the Bahamas for several months for multiple LayerZero Labs employees, their families, and their dogs. Additionally, FTX invited LayerZero Labs employees to Super Bowl parties and Miami Heat playoff games.

It is worth noting that Alameda Ventures, a separate company from Alameda Research but controlled by the same management, announced its investment in LayerZero Labs in January 2022.

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Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.

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COINTURK NEWS 11 September, 2023 - 10:05 am 11 September, 2023 - 10:05 am
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