A Californian has filed a class-action lawsuit against Binance.US and its CEO, Changpeng Zhao (also known as CZ), in a significant legal move. The action, which was brought to the District Court of Northern California on October 2nd, cites many violations of unfair competition laws from both the federal and state of California. The lawsuit’s main contention is on claims that CZ, who led Binance, engaged in actions intended to monopolize the cryptocurrency market at the expense of FTX, one of its rivals.
The plaintiff in this case, Nir Lahav, is identified solely as a California resident. The central issue stems from tweets made by CZ on Twitter (now known as X) in early November. These tweets were posted on the eve of a significant event in the cryptocurrency world: the collapse of FTX, a rival exchange to Binance. The lawsuit contends that these tweets, coupled with Binance’s decision to liquidate its holdings in FTX’s utility token FTT on November 6th, played a pivotal role in the subsequent collapse of FTX.
![FTX Customers File Class-Action Lawsuit Against Binance, Alleging Manipulation image 13](https://i0.wp.com/nosisnews.com/wp-content/uploads/2023/10/image-13.png?resize=831%2C765&ssl=1)
![FTX Customers File Class-Action Lawsuit Against Binance, Alleging Manipulation image 13](https://i0.wp.com/nosisnews.com/wp-content/uploads/2023/10/image-13.png?resize=831%2C765&ssl=1)
It is worth noting that Binance was believed to own as much as 5% of all FTT tokens. On November 7th, CZ made a Twitter announcement stating that Binance had signed a letter of intent to acquire FTX but had opted to back out of the deal the very next day. According to the lawsuit, CZ’s public dissemination of this information regarding the withdrawal of the acquisition offer was instrumental in causing the rushed and unprecedented collapse of FTX.
We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete. 2/4
— CZ 🔶 Binance (@cz_binance) November 6, 2022
The lawsuit makes several allegations. First, it asserts that CZ’s tweet on November 6th, which mentioned Binance’s decision to liquidate any remaining FTT holdings, was false and misleading. The plaintiffs argue that this tweet was intended to manipulate the price of FTT in the market to drive it down. They cite a portion of the tweet where CZ stated, “We are not against anyone… But we won’t support people who lobby against other industry players behind their backs,” as evidence of Binance’s opposition to FTX CEO Sam Bankman-Fried’s “regulatory efforts.”
Furthermore, the lawsuit claims that CZ’s proposal to acquire FTX was not made in good faith and had an adverse impact on FTX, ultimately leading to its collapse. The plaintiffs highlight that as a result of CZ’s tweet, the price of FTT dropped significantly, plummeting FTX into bankruptcy without affording its executives and board of directors the opportunity to take corrective measures to protect clients and end-users.
The lawsuit seeks various forms of relief, including monetary damages, court costs, and disgorgement of ill-gotten gains, based on seven separate counts. Additionally, the suit states that the plaintiff believes there are thousands of potential members in the proposed class.
It’s worth mentioning that both Binance and FTX have been subject to regulatory actions by the U.S. Securities and Exchange Commission (SEC). Notably, the criminal case against FTX CEO Sam Bankman-Fried is scheduled to commence on October 4th in New York.
CZ, in response to potential accusations of unfair competition, addressed the matter in the same tweet cited in the lawsuit. He wrote, “Regarding any speculation as to whether this is a move against a competitor, it is not.” However, despite this clarification, speculation within the cryptocurrency community persisted, with the CEOs of both exchanges engaging in public exchanges on Twitter for several weeks following the events in question.
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