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

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

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

The lawsuit was filed as Sam Bankman-Fried, the former CEO of FTX, faces his first day in court, where he will fight criminal charges related to the collapse of his crypto empire last November.

The lawsuit contends 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 said that the collective claims of the putative class members exceeded $5 million.

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

The document showed that 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 announcement resulted in a drop in the value of the token, with FTX depositors reacting by pulling funds out of the exchange until FTX eventually froze all withdrawals.

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

While Zhao said in a statement that Binance would liquidate its FTT assets, the exchange already sold $530 million worth of FTT on November 5, the lawsuit alleges.

Binance faces an additional headache as it faces another hurdle in the financial industry.

Binance's legal problems are exacerbated by the lawsuit.

The exchange and Zhao have already filed civil lawsuits against the SEC for violations of securities laws and the Commodity Futures Trading Commission, which has been looking the other way on activities involving sanctioned individuals.

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

Crypto investors are guarding their eyes on what law enforcement is planning to do with Binance. A criminal lawsuit and/or a shutdown of the exchange could be catastrophic for crypto markets.

Moody's Analytics' senior director of product innovation for Moody's Analytics, Yiannis Giokas, speaks at DL News.

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