Cryptocurrency Trader Files Class Action Suit Against Binance Over FTX Collapse

Blockchain, News | October 3, 2023 By:

A class action lawsuit was filed on October 2, 2023, in the Northern District of California against cryptocurrency exchange Binance, alleging unfair competition and manipulation of the market leading to the collapse of rival exchange FTX.

The lead plaintiff, Nir Lahav, is a California resident who lost cryptocurrency assets when FTX filed for bankruptcy in November 2022. The lawsuit names Binance, its US subsidiaries BAM Trading Services and BAM Management, and CEO Changpeng Zhao as defendants.

According to the complaint, Binance invested in FTX’s FTT token in 2019 and owned up to 5% of the total supply. The rivalry between the two exchanges intensified as FTX founder Sam Bankman-Fried lobbied for regulation of the crypto industry, while Binance allegedly opposed it.

On November 6, 2022, Zhao tweeted that Binance would liquidate its remaining FTT holdings due to “recent revelations.” However, the suit claims Binance had already sold $530 million worth of FTT the day before. After the tweet, FTT’s price dropped 14% in 24 hours.

Two days later Zhao tweeted that Binance intended to fully acquire FTX to “protect users” from a liquidity crunch. This briefly stabilized FTT’s price before Zhao tweeted again on November 9th that the acquisition was canceled, using a crying emoji. The price of FTT then plummeted from $22 to $3.

According to the complaint, “Zhao publicly disseminated this information on twitter and other social media platforms to hurt FTX Entities that ultimately lead to a rushed and unprecedented collapse of FTX Entities.”

The lawsuit alleges Binance manipulated the market with false statements, inside information, and the canceled acquisition in order to trigger FTX’s collapse and consolidate its dominance of the crypto exchange market.

Plaintiff’s attorney Deepali Brahmbhatt stated: “Laws protecting securities are equally applicable to cryptocurrency platforms. Zhao’s vendetta has hurt Plaintiff and the Class.”

The proposed class includes U.S. residents who had any currency deposited or invested on FTX during the market volatility between November 6-8, 2022. The suit seeks compensatory and punitive damages for alleged violations of federal securities laws, California unfair competition laws, and negligent and intentional misrepresentation.

A copy of the original filing can be found here.