A group of FTX users has filed a class action lawsuit against Binance and its CEO, Changpeng Zhao (CZ), alleging that they engaged in market manipulation and fraud to undermine FTX and drive it into bankruptcy.
The lawsuit alleges that Binance sold its FTT stake in early November 2022, before CZ tweeted that Binance would sell its remaining FTT tokens due to “recent revelations.” The lawsuit claims that Binance’s tweet deliberately misled the market and triggered a decline in FTT’s price. The lawsuit further alleges that CZ’s tweets on Nov. 7 about Binance signing a nonbinding letter of intent to acquire FTX were also misleading, temporarily halting FTT’s slide. The next day, CZ tweeted that Binance would not acquire FTX after all, sending FTT plunging again and forcing FTX into bankruptcy.
The lawsuit accuses Binance and CZ of unfair competition, market manipulation, fraudulent practices, and making false statements, asserting that their actions were driven by animosity toward FTX and its founders’ lobbying for greater crypto regulation. It claims Binance engaged in “bait and switch” tactics to accelerate FTX’s collapse after Binance sold its FTT stake.
The lawsuit seeks damages for FTX users unable to access their funds as well as disgorgement of Binance’s alleged ill-gotten gains from benefitting at FTX’s expense. It claims Binance’s market share has substantially increased since eliminating its major rival.
Binance and CZ have not yet commented on the lawsuit. The case underscores the ongoing lack of regulatory clarity around cryptocurrencies as disputes play out in the courts.