Binance CEO's personal vendetta led to FTX collapse, lawsuit claims

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Binance CEO's personal vendetta led to FTX collapse, lawsuit claims

Binance CEO Changpeng 'CZ' Zhao's personal vendetta, according to a new class-action lawsuit against the world's biggest crypto exchange, saw him post misleading information that caused FTX's collapse.

The lawsuit alleges that Sam Bankman-Fried, the former CEO of FTX, will face his first day in court, where he will fight criminal charges relating to the collapse of his crypto empire last November.

The lawsuit alleges that Zhao's actions ultimately led 'to a rushed and unprecedented collapse of FTX Entities', and ended up hurting Lahab and other retail investors when FTX became insolvent.

The filing revealed that an aggregate claim of the putative class members exceeded $5 million.

FTX's woes began on November 2, 2022, when details of a balance sheet published by Alameda Research, a trading company founded by Bankman-Fried, were published by CoinDesk.

The document shows that a significant portion of Alameda's portfolio was locked in illiquid tokens and FTX's native token FTT.

On November 6, Zhao wrote on Twitter, now X, that Binance would liquidate its remaining FTT holdings.

The token's price dropped sharply, and FTX depositors responded by withdrawing funds from the exchange until FTX eventually froze all withdrawals.

The next day, Zhao pulled out of the deal and FTX filed for bankruptcy on November 11.

While Zhao said on November 6 that Binance would liquidate its FTT assets, the exchange had already sold $530 million worth of FTT on November 5, the suit alleges.

Binance faces another headache - another headache for the investor.

Binance's legal problems are growing on the heels of the lawsuit.

The exchange and Zhao are currently being sued by the SEC for violating securities laws, and the Commodity Futures Trading Commission for looking the other way on activity involving sanctioned individuals.

The industry is also bracing for the possibility that US prosecutors eventually levelling criminal charges against Binance and Zhao.

Binance's law enforcement has made it tough to keep track of what's happening in the cryptocurrency market. The impact of a criminal lawsuit or a shut down of a crypto exchange could be catastrophic for crypto markets.

The senior director of product innovation at Moody's Analytics, Yiannis Giokas, told DL News, was not immediately available for comment.

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