Bankrupt cryptocurrency exchange FTX has filed a lawsuit against cross-chain protocol LayerZero Labs, seeking to recover $21 million in funds allegedly illegally withdrawn before FTX shut down in November 2022, according to court documents filed on September 9.
The case dates back to transactions between Alameda Ventures, the venture capital arm of FTX sister company Alameda Research, and LayerZero between January and May 2022.
According to court documents, Alameda Ventures paid more than $70 million in two transactions to acquire approximately 4.92% of LayerZero’s shares. Additionally, in March, Alameda Ventures paid an additional $25 million in a public auction to purchase 100 million STG tokens, which will be distributed within six months starting in March 2023.
Super excited to work with us @LayerZero_Labs!
They are building a critical missing piece in crypto infrastructure – cross-chain liquidity.
More importantly, they do a great job of building a great product. https://t.co/TvEC6sfpeE
— SBF (@SBF_FTX) March 30, 2022
Among those deals, in February, LayerZero provided a $45 million loan to Alameda Research, the parent company of Alameda Ventures, with an annual interest rate of 8%.
When the crisis at FTX erupted in early November, LayerZero sought a deal to return Alameda’s stake. The agreement includes the return of shares to LayerZero in exchange for the forgiveness of a $45 million loan. Another deal involving 100 million STG tokens was also concluded, with LayerZero buying back the tokens at a discount of $10 million on November 9. However, the deal never completed. LayerZero did not pay for the tokens and Alameda Ventures did not transfer the tokens.
general speaking
We did buy all the tokens (back)
Better is better
– Raz and Brian https://t.co/anBSloYRLV
— Raz (@ryanzarick) November 10, 2022
FTX claims in the lawsuit that LayerZero tapped Alameda Ventures during the liquidity crisis:
“LayerZero was well aware that Alameda Research was facing a liquidity crisis and within approximately 24 hours negotiated a markdown with Alameda Research’s then-CEO Caroline Ellison.”
In addition to the cancellation of the agreement, the complaint seeks to recover funds withdrawn in the days before FTX filed for bankruptcy protection, including approximately $21.37 million from LayerZero Labs, as well as $13.07 million from its former chief operating officer Ari Litan, and from a subsidiary $6.65 million from the company. Skip and goose.
LayerZero Labs is not the first company to be sued by FTX. The bankrupt company is also trying to recoup billions of dollars from transactions carried out by various subsidiaries before the group collapsed.
Cointelegraph reached out to LayerZero Labs but had not received a response as of press time. The lawsuit is unrelated to LayerZero Power Systems, which owns the LayerZero trademark and is not involved in the crypto industry.
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