Lawsuit accuses Binance and CEO of unfairly triggering collapse of competitor FTX Lawsuit accuses Binance and CEO of unfairly triggering collapse of competitor FTX
Class action lawsuit filed by FTX customer alleging market manipulation by Binance.
2 min read
Updated: Oct. 3, 2023 at 8:45 am UTC
Web Summit / CC BY 2.0 / Flickr. Remixed by CryptoSlate
A class action lawsuit was filed on Oct. 2 in California federal court accusing cryptocurrency exchange Binance and its CEO Changpeng Zhao (CZ) of unfair competition and manipulating the market to trigger the downfall of rival exchange FTX.
The lawsuit was filed by an FTX user who lost assets when FTX collapsed and filed for bankruptcy last month. It alleges Binance, which held a stake in FTX’s FTT token, made false public statements about selling that stake, causing FTT’s price to decline, then made misleading statements about intending to acquire FTX, temporarily stabilizing FTT’s price before again declining an acquisition.
According to the complaint, Binance had invested in FTX’s FTT token in 2019 and owned up to 5% of the total FTT supply. On Nov. 6, CZ tweeted that Binance would sell its remaining FTT due to “recent revelations,” causing FTT to drop 14% in 24 hours. However, the lawsuit claims Binance had already sold 23 million FTT worth $530 million the day before Zhao’s tweet.
The lawsuit asserts CZ deliberately misled the market to trigger a decline in FTT and undermine confidence in rival FTX. It further alleges that tweets by CZ on Nov. 7 about Binance signing a nonbinding letter of intent to acquire FTX were also misleading, temporarily halting FTT’s slide. The next day, CZ tweeted that Binance would not acquire FTX after all, sending FTT plunging again and forcing FTX into bankruptcy.
The class action accuses Binance and CZ of unfair competition, market manipulation, fraudulent practices, and making false statements, asserting that their actions were driven by animosity toward FTX and its founders’ lobbying for greater crypto regulation. It claims Binance engaged in ‘bait and switch’ tactics to accelerate FTX’s collapse after Binance sold its FTT stake.
The lawsuit seeks damages for FTX users unable to access their funds as well as disgorgement of Binance’s alleged ill-gotten gains from benefitting at FTX’s expense. It claims Binance’s market share has substantially increased since eliminating its major rival.
Binance and CZ have not yet commented on the lawsuit. The case underscores the ongoing lack of regulatory clarity around cryptocurrencies as disputes play out in the courts.
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Liam 'Akiba' Wright
Also known as "Akiba," Liam is a reporter, editor and podcast producer at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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BNB, or Binance Coin, is a cryptocurrency created by Binance.
FTX Token
$1.48954
FTX is a cryptocurrency derivatives exchange that offers futures, leveraged tokens and OTC trading.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Changpeng Zhao, popularly known as “CZ,” is a notable figure in the cryptocurrency world, primarily for founding and leading Binance, the world’s leading cryptocurrency exchange by trading volume.
