LayerZero Labs

FTX sues LayerZero Labs for $21 million

FTX, a cryptocurrency exchange that filed for bankruptcy in November 2022, is seeking to recover $21 million through a lawsuit against LayerZero Labs, a company specializing in cross-chain protocol development.

The legal battle revolves around transactions that took place between LayerZero Labs and Alameda Ventures, a venture capital division of Alameda Research, prior to FTX’s bankruptcy.

According to FTX’s lawsuit, LayerZero Labs withdrew $21 million in violation of the law, raising questions about the timing and legitimacy of these transactions. These dealings occurred between January and May 2022, just before FTX’s financial woes led to its bankruptcy declaration.

In response to the lawsuit, LayerZero Labs CEO Bryan Pellegrino voiced strong objections, stating that the lawsuit contained unsupported allegations.

He also revealed that LayerZero Labs had been attempting to engage with FTX’s liquidators for almost a year regarding share ownership matters but had received no response.

Read More: Former FTX Executive Pleads Guilty to Illegal Campaign Contributions

Pellegrino suggested that FTX’s legal action might be a tactic to prolong the court case and incur more legal expenses.

The Controversial Agreement

The crux of the complaint centres on an arrangement that allowed 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 unfinished deal concerning 100 million STG tokens that LayerZero had committed to repurchase at a $10 million discount but never executed. FTX alleges that LayerZero exploited Alameda Ventures during a liquidity crisis, orchestrating a fire-sale transaction within 24 hours.

Pellegrino vehemently denied having preferential information regarding the withdrawals and emphasized that refuting this claim would be straightforward. He disclosed that he personally deposited millions of dollars, 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 complexity and legal disputes that can arise in the cryptocurrency and blockchain industries.

As the case unfolds, the cryptocurrency community and legal experts will be closely watching to see how it affects the broader landscape of digital asset regulation and financial accountability.