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Binance CEO Changpeng Zhao Faces Class-Action Lawsuit Over Alleged Role in FTX’s Collapse

Jai Pratap
Last updated: | 2 min read
Source: a video screenshot, Entrepreneur ME / YouTube

Binance CEO Changpeng Zhao and Binance.US are facing a class-action lawsuit filed by a California resident Nir Lahav for their alleged role in causing the downfall of rival exchange FTX.

The lawsuit further accuses them of various violations of federal and California law related to unfair competition and attempts to monopolize the cryptocurrency market.

The Lawsuit Claims CZ’s Tweets Harmed FTX

The lawsuit referred to a series of tweets made by Changpeng Zhao in early November, just before the dramatic collapse of FTX. 

These tweets are claimed to have had a significant impact on FTX’s fate. 

On November 6, Zhao revealed Binance’s decision to liquidate its holdings in the FTX utility token FTT, which sent shockwaves through the crypto community. 

The plaintiffs in the lawsuit estimate that Binance held up to 5% of all FTT tokens.

The following day, Zhao made another tweet announcing Binance’s intent to acquire FTX, only to retract that commitment a day later. 

According to the lawsuit, this announcement and subsequent withdrawal were made with the intent to harm FTX. 

The lawsuit alleges that Zhao’s actions, particularly his Twitter posts, played a pivotal role in the “rushed and unprecedented collapse of FTX Entities.”

One of the key points of contention in the lawsuit is Zhao’s November 6 tweet, where he stated, “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books.” 

The lawsuit claims this statement was false and misleading, as Binance had already divested its FTT holdings. 

The plaintiffs argue that this tweet was intended to drive down the price of FTT in the market.

There Could be Thousands of Members in the Proposed Class-Action

Additionally, the lawsuit points to a statement in Zhao’s tweet where he said, “We are not against anyone… But we won’t support people who lobby against other industry players behind their backs.” 

The plaintiffs interpret this as an indication that Binance opposed FTX CEO Sam Bankman-Fried’s “regulatory efforts.”

The lawsuit seeks monetary damages, court costs, and the disgorgement of ill-gotten gains based on seven counts, with the plaintiff believing there could be thousands of members in the proposed class. 

Binance is currently facing regulatory scrutiny from the  U.S. Securities and Exchange Commission (SEC) that could decide the fate of CZ’s crypto empire.