FTX Sues LayerZero Labs, Seeks To Reclaim $21M in Funds
FTX is suing LayerZero Labs
Bankrupt cryptocurrency exchange FTX has taken legal action against cross-chain protocol LayerZero Labs, aiming to reclaim $21 million in funds that were allegedly withdrawn unlawfully before FTX's closure in November 2022. Court documents filed on September 9 revealed FTX's lawsuit.
The claim derives from transactions between Alameda Ventures, the venture capital arm of Alameda Research, and LayerZero that took place between January and May 2022. According to the court filing, Alameda Ventures paid more than $70 million in two transactions to acquire a 4.92% ownership in LayerZero. In addition, Alameda Ventures spent $25 million for 100 million STG tokens in a public auction in March, with distribution set to begin in March 2023.
LayerZero made a $45 million loan to Alameda Ventures' parent firm, Alameda Research, at an 8% annual interest rate during this time. LayerZero attempted to negotiate the restoration of its investment in Alameda when FTX faced a problem in early November. The proposed agreement involved returning shares to LayerZero in exchange for the $45 million loan being forgiven. There was also an agreement to buy back 100 million STG tokens, however the transaction never took place.
FTX's lawsuit accuses LayerZero of taking advantage of Alameda Ventures during a liquidity crisis. The complaint seeks the recovery of funds, including approximately $21.37 million from LayerZero Labs, $13.07 million from former COO Ari Litan, and $6.65 million from subsidiary Skip & Goose. This legal action is part of FTX's broader efforts to recoup billions of dollars from transactions made by various subsidiaries prior to its collapse.
