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

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

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

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

The suit further 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 alleged that the collective claims of the putative class members exceeded $5 million.

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

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

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

The announcement caused the value of the token to drop sharply, and FTX depositors responded by pulling funds out of the exchange until FTX eventually froze all withdrawals.

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

While Zhao said on Nov. 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 is still facing another headache, as the company faces a major embarrassment.

Binance's legal problems are compounded by the lawsuit.

The exchange and Zhao are already facing civil lawsuits from the SEC for breaching securities laws, and the Commodity Futures Trading Commission for looking the other way on activities involving sanctioned individuals.

But the industry is also bracing for the possibility of US prosecutors eventually bringing in charges against Binance and Zhao.

Binance's investors are paying close attention to what law enforcement is imposing on Binance. The consequences of a criminal lawsuit and/or a shutdown of the exchange for crypto markets could be catastrophic.

Moody's Analytics' senior director of product innovation, Yiannis Giokas, told DL News last week.

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