Cryptocurrency exchange Binance Holdings Ltd. and its Chief Executive Officer Changpeng ‘CZ’ Zhao, have been hit with another Class Action lawsuit for allegedly playing a part in the downfall of its key rival, FTX Derivatives Exchange.
Basis for the Binance Class Action
According to a report from Bloomberg, the class action lawsuit was filed in the United States District for the Northern District of California earlier this week. Per the claims, Binance got involved in unfair competition and manipulated the market to trigger the collapse of the Bahamian-headquartered FTX.
Hence, Plaintiff Nir Lahav is accusing the Zhao-led exchange of violating the US Securities Exchange Act as well as California’s Unfair Competition Law.
Noteworthy, problems started at FTX last year after Binance publicly declared that it was backing out of a deal with the now-defunct crypto exchange. Binance invested in FTX Tokens (FTT) as far back as 2019, holding about 5% of the coin’s total supply. On November 6, 2022, CZ released a tweet detailing his firm’s plan to sell off its remaining FTT holding citing a “recent revelation.”
The news caused an uproar in the broad cryptocurrency ecosystem, especially amongst FTX customers. The FTT coin lost a significant percentage of its value within a few hours of CZ’s announcement. Many FTX users became skeptical about the future of the exchange and began to liquidate their holdings.
All of these withdrawals stirred a bank run that left FTX in chaos and within a few days, the firm imploded.
More Alleged Manipulation Pointed Out
Shortly after, Binance made a misleading statement about its intention to acquire FTX as a way of salvaging what was left of the firm. The news about the acquisition stabilized the price of FTT for a moment but it was not long after that Binance pulled out of the acquisition deal.
Also, the recent lawsuit revealed that Binance had already sold 23 million FTT worth $530 million the day before CZ’s tweet went public. This further underscores the claim in the lawsuit that CZ intentionally made that tweet to manipulate the market and as such, is liable for the Plaintiff’s losses.
Overall, the lawsuit compounds the legal hurdles surrounding Binance with a related legal battle brewing between the exchange and the US Securities and Exchange Commission (SEC)
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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