A class-action lawsuit was filed against Binance.US and its CEO, Changpeng Zhao, in the District Court of Northern California on October 2. The lawsuit accuses Binance and Zhao of violating federal and California laws on unfair competition by attempting to monopolize the cryptocurrency market and harming their competitor, FTX. The lawsuit was brought by Nir Lahav, a California resident.
The lawsuit focuses on tweets made by Zhao in early November, just before FTX experienced a collapse. On November 6, Binance decided to liquidate their holdings in the FTX utility token FTT, which the plaintiffs estimate to be up to 5% of all FTT tokens. The following day, Zhao tweeted that Binance had signed a letter of intent to acquire FTX but backed out of the deal one day later. The lawsuit claims that Zhao disseminated this information on social media platforms to hurt FTX, ultimately leading to its collapse.
The lawsuit argues that Zhao’s tweets were false and misleading. The plaintiffs found evidence in one of Zhao’s tweets where he stated that Binance had decided to liquidate any remaining FTT on their books. However, the plaintiffs claim that Binance had already sold its FTT holdings and that the tweet was intended to cause a decline in the price of FTT in the market.
The lawsuit also alleges that Zhao’s proposal to acquire FTX was not made in good faith and that it would lead to the collapse of FTX. The significant drop in the price of FTT, from $23.1510 to $3.1468, allegedly resulted in the bankruptcy of FTX without giving its executives and board of directors an opportunity to salvage the situation and protect its clients and end-users.
The lawsuit demands monetary damages, court costs, and disgorgement of ill-gotten gains based on seven counts. The plaintiff believes that there are thousands of members of the proposed class affected by Binance’s actions.
Both Binance and FTX are currently subject to SEC actions. The criminal case against FTX CEO Sam Bankman-Fried is scheduled to begin on October 4 in New York. Zhao addressed accusations of unfair competition in one of his tweets, stating that the acquisition proposal was not a move against a competitor. However, speculation within the crypto community continued, and the CEOs of Binance and FTX exchanged jibes on Twitter for weeks afterward.
The lawsuit highlights the growing regulatory scrutiny in the cryptocurrency industry and the legal battles between major players in the market. It remains to be seen how the court will rule on the allegations made against Binance and its CEO, Changpeng Zhao.
In summary, a class-action lawsuit has been filed against Binance and its CEO, Changpeng Zhao, accusing them of unfair competition and attempting to monopolize the cryptocurrency market by harming their competitor, FTX. The lawsuit claims that misleading tweets by Zhao resulted in the collapse of FTX and demands monetary damages and court costs. Both Binance and FTX are facing regulatory actions, and the legal battle between the two companies continues.
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