Binance CEO Changpeng Zhao Faces Class Action Lawsuit Over Alleged Misconduct That Led To FTX's Collapse

A class-action lawsuit has been lodged against cryptocurrency exchange Binance and its CEO, Changpeng Zhao, on Monday. The plaintiff, a California resident, accuses Binance and Zhao of activities that reportedly led to the downfall of rival exchange FTX.

What Happened: Binance and Zhao are alleged to have violated federal and Californian laws concerning unfair competition. The complaint argues that they sought to establish a monopoly in the crypto market by inflicting harm upon FTX.

The lawsuit brought forward by Nir Lahav puts emphasis on social media posts made by Zhao in early November, preceding the fall of FTX. Lahav argues that these posts, in conjunction with Binance’s choice to liquidate its FTX token FTT/USD holdings, led to the downfall of the competing exchange.

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On Nov. 7, Zhao posted a tweet indicating Binance’s plans to acquire FTX, only to withdraw the statement the very next day. The lawsuit contends this action was not done in good faith and played a significant role in FTX’s collapse.

Moreover, the lawsuit alleges that Zhao’s subsequent tweet about liquidating any leftover FTT was misleading, as Binance had already offloaded its FTT holdings. According to Lahav, the tweet was specifically designed to cause a drop in FTT’s market price.

The lawsuit is seeking monetary damages, court costs, and the return of ill-gotten gains. At present, both Binance and FTX are under SEC scrutiny, with the criminal case against FTX CEO Sam Bankman-Fried scheduled to start on October 4 in New York.

Photo by Iryna Budanova on Shutterstock

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