FTX Estate Sues Layerzero Labs for $85M Over Alleged Fraudulent Deals and Asset Withdrawals Amidst Collapse

The bankrupt estate of cryptocurrency exchange FTX is suing blockchain company Layerzero Labs in an attempt to claw back a $45 million deal and over $40 million in withdrawals made in the days before FTX filed for bankruptcy. The lawsuit alleges that Layerzero exploited FTX’s financial distress to negotiate a fire-sale transaction just prior to the bankruptcy filing. Layerzero’s co-founder and CEO Bryan Pellegrino, however, says the lawsuit “is filled with unsubstantiated claims.”

Layerzero Accused of Exploiting FTX’s Distress: Lawsuit Highlights Purported Fraudulent Activities

The complaint filed by FTX accuses Layerzero of fraudulent transfers, unjust enrichment, and violations of the automatic bankruptcy stay. It seeks to recover equity that FTX subsidiary Alameda Ventures transferred to Layerzero as well as alleged cryptocurrency withdrawals from FTX by Layerzero employees.

FTX claims that in November 2022, as the exchange faced a severe liquidity crisis, Layerzero demanded immediate repayment of a $45 million loan to Alameda Ventures. Layerzero then negotiated a deal whereby Alameda Ventures transferred its nearly $150 million equity stake in Layerzero in exchange for forgiveness of the loan.

The lawsuit claims this was a fraudulent transfer made by FTX insiders like Caroline Ellison to hide assets from creditors. It also alleges that Layerzero employees including former chief operating officer, Ari Litan, reportedly withdrew over $40 million worth of assets from FTX exchange accounts in violation of bankruptcy preference laws.

According to FTX, these withdrawals from Layerzero occurred on November 7 and 8, 2022, just one or two days before FTX halted customer withdrawals. The lawsuit asserts that Layerzero exploited its inside knowledge of FTX’s financial troubles for its own benefit.

In addition to recouping the alleged fraudulent transfers and improper withdrawals, FTX is seeking to disallow claims filed by Layerzero against the FTX bankruptcy estate. FTX claims that Layerzero violated the automatic stay by attempting to take control of crypto tokens post-bankruptcy. Following the lawsuit filing, the CEO of Layerzero, Bryan Pellegrino, denied the claims on the social media platform X.

“Regarding the FTX suit, the entire suit is filled with unsubstantiated claims. We have been in communication with the FTX liquidators for almost a year now and have time and time again attempted to proactively address the issue of ownership of the shares with them and have been ignored for the entire time,” Pellegrino wrote.

“To see them wait all this time to file a suit filled with unsubstantiated claims leads me to believe the purpose is not to settle the issue but simply prolong the process in hopes of receiving more legal fees,” he added.

What do you think about FTX suing Layerzero? Share your thoughts and opinions about this subject in the comments section below.

from Bitcoin News https://ift.tt/Ey1AXSz