FTX, the bankrupt cryptocurrency exchange, has filed a lawsuit against LayerZero Labs, a cross-chain protocol company. The legal action aims to recover $21 million, alleging that LayerZero Labs illicitly withdrew these funds just before FTX declared bankruptcy in November. The lawsuit traces back to transactions between Alameda Ventures, the venture capital arm of FTX’s sister company Alameda Research, and LayerZero Labs, which occurred between January and May 2022.
LayerZero Labs CEO refutes allegations
Bryan Pellegrino, the CEO of LayerZero Labs, has countered the lawsuit’s claims, stating that the legal action is filled with unsubstantiated allegations. The FTX estate, led by CEO John Ray III, seeks to reverse several deals made just before FTX’s collapse.
One such transaction allowed Alameda Research to sell back a 5% stake in LayerZero, valued at $150 million, in exchange for LayerZero forgiving a $45 million loan. The lawsuit also highlights an incomplete transaction related to 100 million STG tokens, which LayerZero agreed to buy back at a discounted rate of $10 million but never completed.
FTX alleges that LayerZero took advantage of Alameda Ventures during a liquidity crisis, negotiating a fire-sale transaction within 24 hours. The lawsuit aims to recover approximately $21.37 million from LayerZero Labs, $13.07 million from its former COO Ari Litan, and $6.65 million from a subsidiary, Skip & Goose.
The legal battle between FTX and LayerZero Labs marks a significant chapter in cryptocurrency disputes. Both parties are gearing up for a protracted legal fight, with FTX aiming to recover $21 million amid its bankruptcy proceedings and LayerZero Labs defending against what it claims are baseless allegations.