FTX Sues LayerZero Labs

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Last Updated on September 11, 2023 by Bitfinsider

According to court records filed on September 9, FTX has filed a lawsuit against cross-chain protocol LayerZero Labs, attempting to recover $21 million in money that were allegedly fraudulently removed prior to FTX’s demise in November 2022.

The issue stems from transactions between Alameda Ventures — the venture capital arm of Alameda Research, FTX’s sibling firm — and LayerZero that occurred between January and May 2022.

Alameda Ventures paid more than $70 million in two transactions to purchase a 4.92% share in LayerZero, according to the court filing. In addition, Alameda Ventures spent another $25 million in March for 100 million STG tokens in a public auction, which will be distributed over a six-month period commencing in March 2023.

Among these deals, LayerZero borrowed $45 million to Alameda Ventures’ parent company, Alameda Research, in February under a promissory note with an annual interest rate of 8%.

LayerZero sought an agreement for the return of its investment in FTX when the situation erupted in early November. The transaction includes the return of shares to LayerZero in exchange for the $45 million loan being forgiven. Another agreement was struck over 100 million STG tokens, which LayerZero acquired back at a discount for $10 million on November 9. However, this deal was never finalised. Alameda Ventures did not pay for the tokens, and LayerZero did not receive them.

Along with the cancellation of the agreements, the complaint seeks recovery of funds withdrawn days before FTX’s bankruptcy filing, including approximately $21.37 million from LayerZero Labs, $13.07 million from Ari Litan, the company’s former chief operating officer, and $6.65 million from a subsidiary, Skip & Goose.

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