Lawsuit Blaming Crypto Exchange Binance Actions for FTX’s Collapse to Be Handled in Consolidated Proceedings

News | April 25, 2024 By:

On Friday, April 12, 2024, the Judicial Panel On Multidistrict Litigation ruled that a class action lawsuit against cryptocurrency exchange Binance Holdings stemming from the collapse of FTX could be folded into broader multi-district litigation regarding FTX.

The multi-district litigation, or MDL, centralizes numerous federal lawsuits from customers and investors seeking damages from the stunning collapse of FTX, previously one of the largest cryptocurrency exchanges in the world, in November 2022. Suits alleged that executives at FTX fraudulently misrepresented customer assets and promoters failed to disclose known risks. Potential class members include anyone with bitcoin, ether, or fiat currency deposited on FTX platforms during the relevant period.

The class action against Binance, called Lahav v. Binance Holdings, presents an alternate theory that actions by Binance caused or exacerbated FTX’s collapse. On social media in November, Binance’s former CEO published statements about liquidating Binance’s holdings in FTX and abruptly withdrawing an offer to acquire FTX’s commercial operations. The plaintiff claims these moves were intended to eliminate FTX as a competitor in the cryptocurrency market.

While Lahav assigns responsibility for FTX’s collapse to different entities than other suits, the panel found it necessarily involves the same “complex factual inquiry” as the MDL – determining the root causes behind FTX’s sudden implosion. Transferring Lahav promotes efficiency and avoids inconsistent rulings that could result from separate proceedings. Though discovery may progress differently, all cases remain at an early pleading stage.

Additionally, the Lahav class partially overlaps the broader proposed classes in the MDL. Both seek compensation for losses suffered by individuals and companies exposed to risk through FTX platforms during the same general period. Consolidating pre-trial litigation in the Southern District of Florida, overseen by Judge K. Michael Moore, facilitates coordinated resolution of class certification issues.

By pulling Lahav under the umbrella of the FTX Cryptocurrency Exchange Collapse MDL, the panel aims to streamline resolution of shared factual and legal questions surrounding what led FTX, once a leader in the emerging cryptocurrency industry, to abruptly fail and wipe out billions in investor assets.

Please contact BlockTribune for access to a copy of this filing.