FTX is currently seeking to invalidate agreements that were made shortly before its collapse. Additionally, they are working towards reclaiming millions of funds that have been transferred to LayerZero Labs and its affiliated entities.
The cryptocurrency exchange FTX, which declared bankruptcy, has filed a legal action against LayerZero Labs, a cross-chain protocol. Their objective is to retrieve $21 million in funds allegedly withdrawn unlawfully before FTX’s closure in Nov.
From Jan to May 2022, there were transactions involving Alameda Ventures, the venture capital division of Alameda Research, which is the sister company of FTX. These transactions are closely connected to the current situation at hand with LayerZero.
According to court records submitted on Sept 9, Alameda Ventures executed two transactions. These transactions amounted to over $70 million, securing approximately a 4.92% ownership stake in LayerZero.
In March, Alameda Ventures also participated in a public auction, acquiring 100 million STG tokens for an additional $25 million. The distribution of these tokens is scheduled over six months starting in March 2023.
In Feb, LayerZero extended a loan worth $45 million to Alameda Research. This loan was facilitated through a promissory note, which carried an annual interest rate of 8%. Alameda Research is the parent company of Alameda Ventures.
FTX Sues LayerZero Labs For $41 Million Recovery
During the early days of November, as the crisis unfolded at FTX, LayerZero pursued an arrangement with Alameda to reclaim its stake. This arrangement involved returning shares to LayerZero in exchange for forgiving a $45 million loan.
Moreover, there was an additional agreement concerning 100 million STG tokens that LayerZero intended to repurchase at a discounted rate of $10 million on Nov 9. However, this transaction remained incomplete because LayerZero failed to pay, and Alameda Ventures did not transfer the tokens as agreed.
In the lawsuit, FTX claims that LayerZero took advantage of Alameda Ventures during financial instability. LayerZero was fully aware of the financial difficulties facing Alameda Research and quickly initiated a high-pressure negotiation with Caroline Ellison, who served as the CEO of Alameda Research then. This negotiation unfolded within a remarkably short span of approximately 24 hours.
The complaint seeks both the annulment of the agreement and the recovery of funds withdrawn shortly before FTX filed for bankruptcy. Specifically, it aims to recuperate approximately $21.37 million from LayerZero Labs, $13.07 million from Ari Litan (the former chief operating officer), and $6.65 million from a subsidiary called Skip & Goose.
FTX has taken legal action against multiple companies, including LayerZero Labs. Moreover, the bankrupt entity is diligently pursuing compensation for previous transactions conducted by its various subsidiaries, amounting to billions of dollars.
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