Binance and CEO Face Legal Challenges Amid Allegations of FTX Manipulation

Binance and CEO Face Legal Challenges Amid Allegations of FTX Manipulation


In a class-action lawsuit filed on October 2 in the District Court of Northern California, Binance (Binance Holdings Limited, BAM Trading Services, BAM Management US Holdings) and its CEO Changpeng Zhao (“CZ”) are facing serious allegations surrounding attempted monopolization of the crypto market, purportedly through damaging strategies against their competitor FTX.

The Lawsuit Unveiled

The legal battle spearheaded by Nir Lahav, identified as a California resident, is unwrapping a complex tapestry of competitive corporate strategies, social media statements, and consequential market fluctuations.

Allegations and Controversy

The epicenter of the lawsuit draws from a series of statements made by Changpeng Zhao on Twitter, especially in the pivotal time frame leading to FTX’s downfall in early November 2022. A particular focal point is a tweet from Zhao on November 6, wherein he expressed, “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books.” The plaintiffs argue that this statement was not only misleading, considering Binance had already sold its FTT holdings, but also deliberately designed to plunge the price of FTT.

  • FTT’s price dropped from $23.1510 to $3.1468 following Zhao’s tweet.
  • Zhao’s antagonism towards FTX CEO Sam Bankman-Fried’s regulatory initiatives.
  • Zhao announced on November 7th the intention to acquire FTX but withdrew the offer a day later.

Legal Ramifications

The lawsuit delves into various alleged violations, intertwining with both federal and California law related to unfair competition, aiming to bring to light the purportedly malicious tactics employed to disadvantage FTX. With the stakes high, the suit demands monetary damages, court costs, and the disgorgement of ill-gotten gains across seven counts. It has been stated, “Plaintiff believes that there are thousands of members of the proposed class.”

Regulatory Challenges

In the midst of the unfolding legal drama, both Binance and FTX are concurrently entwined in separate SEC actions, potentially indicating larger regulatory pressures within the crypto sphere. The criminal case against the former FTX CEO, Sam Bankman-Fried, is scheduled to commence on October 4th in New York.

Binance US is currently under investigation by several US authorities, such as the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Additionally, there’s persistent speculation that the US Department of Justice (DOJ) has been building a case against Binance and its founder, CZ, for more than a year.

Current Market Situation

At press time, BNB traded at $215.2, just above the 20-day EMA at $214.2.