Erratum: This following article was published with a factual error.It was stated that the case relates to LayerZero, when in actuality FTX has sued LayerZero Labs, of which Bryan Pellegrino is CEO.
- FTX has sued LayerZero Labs in its latest effort to recoup funds.
- LayerZero Labs CEO Bryan Pellegrino has expressed readiness to fight the case, casting doubt on the intentions of the exchange.
- The LayerZero Labs chief’s statements drew further attention to the cost of FTX’s bankruptcy process.
FTX’s stunning collapse in November 2022 sent ripples through the finance world, with investors and millions of customers left holding the bag. As part of efforts to make creditors whole, restructuring officers are on a quest to recoup funds paid to celebrities, brands, and partners in the days leading up to the exchange’s collapse.
However, FTX’s most recent target, LayerZero Labs, a blockchain protocol-building firm with close ties to FTX, does not appear willing to roll over. In response to the exchange’s lawsuit, LayerZero Labs CEO Bryan Pellegrino has issued a scathing verbal attack against FTX’s restructuring officers.
LayerZero Labs CEO: FTX Officers Are Only After More Legal Fees
In a recent lawsuit, FTX alleged that LayerZero Labs had insider information about the exchange’s illiquidity and used this information to broker a deal to buy back its shares and withdraw deposits in the days leading up to its bankruptcy filing. Describing these transactions as fraudulent under the Bankruptcy Code, FTX is seeking to recover over $41 million from the defendants.
However, LayerZero Labs’ Pellegrino has pushed back against FTX’s claims in a Twitter statement on Monday, September 11. The LayerZero chief slammed the lawsuit as nothing more than a hunt for more legal fees, claiming that the firm had made multiple efforts to “proactively” address concerns raised in the suit, only to be ignored.
"To see them wait all this time to file a suit filled with unsubstantiated claims leads me to believe the purpose is not to settle the issue but simply prolong the process in hopes of receiving more legal fees," he asserted.
According to Pellegrino, LayerZero Labs neither had “preferential information” on FTX withdrawals nor knowledge of its insolvency. He noted that the firm was still making deposits on the exchange in the days leading up to the collapse, citing a $1 million deposit on November 7, 2022. He asserted that large withdrawals from the exchange were made to fund business operations and not out of panic. However, he also suggested that the firm had exercised caution in the wake of the rumors surrounding FTX.
Pellegrino expressed disappointment at the lawsuit but concluded that LayerZero Labs was ready to defend its position in court. The LayerZero Labs’ chief’s statement comes as the high legal costs of the FTX bankruptcy have raised eyebrows and, in some instances, received backlash from creditors and crypto community members.
Millions in Legal Fees Attract Scrutiny
The bankruptcy process can be expensive, and this is especially the case for FTX. A court filing in June 2023 revealed that legal fees had already surpassed $200 million.
In August 2023, creditors decried the growing cost, noting that the process was now taking as much as $50 million monthly or nearly $1.6 million daily. Despite these concerns, the efforts of restructuring officers have also yielded significant results.
On the Flipside
- The lawsuit claims that FTX hosted LayerZero Labs staff for months in the Bahamas.
- FTX was a lead investor in LayerZero Labs.
- The Lehman Brothers’ bankruptcy reportedly cost $2.56 billion.
Why This Matters
The FTX collapse left millions of crypto investors in limbo. While restructuring officers are looking to recoup as much funds as possible to make customers whole, the LayerZero Labs case serves as a reminder that this process faces significant obstacles.
Read this to learn more about the claims against LayerZero Labs in the FTX lawsuit:
FTX Revisits Past Deals for Scraps as Debtor Tensions Rise
Binance CEO Changpeng “CZ” Zhao has responded to growing concerns amid the rapid flight of executives from the exchange. Find out more:
Binance CEO Dismisses Solvency Concerns Amid Top Exec Exits