- A class action lawsuit has been filed against Binance and its CEO, Changpeng Zhao.
- The lawsuit alleges market manipulation that led to the collapse of FTX.
- The plaintiffs demand compensatory damages as Binance navigates other legal battles.
In the aftermath of the infamous FTX collapse, cryptocurrency exchange Binance faced accusations of being the catalyst for its rival exchange’s downfall.
Although the accusations quickly subsided, Binance has once again come under fire as a group of investors filed a class-action lawsuit against the exchange, its affiliates, and CEO, Changpeng Zhao.
The Legal Showdown
On October 2nd, a group of investors led by Nir Lahav, initiated legal proceedings against Binance and its CEO Changpeng Zhao, alleging their involvement in a plot to destabilize and bring about the collapse of the now-defunct rival exchange FTX.
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The complaint, filed in the U.S. District Court of Northern California, encompasses a series of infractions, including market manipulation, unfair competition, and violations of Security Exchange Commission (SEC) laws in an attempt to monopolize the cryptocurrency market.
The plaintiffs contend that Binance’s CEO orchestrated a bait-and-switch strategy, presenting a series of tweets from November 6th to 9th, 2022 as evidence. In an initial tweet on November 6th, CZ announced the liquidation of Binance’s FTT holdings, citing “recent revelations that have come to light.”
He further teased the attempted acquisition of FTX, before abruptly reversing the intention under the guise of possessing confidential information, leading to the decline of the token and damage of FTX entities.
They added that this move was driven by CZ’s discontent with FTX’s CEO Sam Bankman-Fried’s advocation for industry regulation within the U.S. as highlighted in his statement, “We are not against anyone. But we won’t support people who lobby against other industry players behind their backs.”
The lawsuit now demands judgment and compensatory damages, putting Binance in yet another unfavorable position as the exchange continues to battle uncertainty and reputational damage.
Binance’s Battles
From market withdrawals to money laundering allegations, Binance has faced a series of legal disputes over the last year.
In March, the Commodities Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission filed lawsuits against the exchange, alleging illegal operations and several violations of securities laws within the region.
Regulatory pressures have also led Binance to exit several markets including the UK, Germany, and the Netherlands. These exits were prompted by sanctions and concerns raised by authorities in their respective regions as Europe’s regulatory landscape tightens.
On the Flipside
- Former FTX CEO, Sam Bankman-Fried will commence trial on October 3rd, 2023.
- Binance is also facing a possible criminal probe as the SEC filed a sealed motion against the exchange and its CEO, Changpeng Zhao.
- Amidst its mounting legal challenges, Binance continues to expand its services within the growing Asia crypto hub.
Why This Matters
If found guilty, Binance’s reputation as an industry player could be significantly impacted, setting a precedent for how the broader industry is regulated.
Discover the implication of the possible criminal probe against Binance:
What Does the SEC’s Sealed Motion Mean for Binance
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