FTX Sues LayerZero Labs, Seeks to Recover $21M

Crypto exchange FTX claims that LayerZero Labs took advantage of Alameda Research amid an economic downturn.

According to reports, the struggling company FTX has sued LayerZero Labs, the creator of the cross-chain protocol, in an effort to recoup $21 million in assets that the company is believed to have fraudulently transferred before FTX collapsed in November. 

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FTX Claims LayerZero Took Advantage of Alameda

In its argument, FTX claims that LayerZero took advantage of Alameda Ventures amid an economic downturn. The filing states: “LayerZero was well aware that Alameda Research was facing a liquidity crisis and, within about 24 hours, negotiated a fire-sale transaction with Caroline Ellison, Alameda Research’s then-CEO.”

A Series of Transactions 

Notably, the case can be traced to a series of transactions that took place between Alameda Ventures and LayerZero from January to May 2022.

In accordance with the court filings submitted on September 9, Alameda Ventures paid over $70 million in two separate payments for a 4.92% share in LayerZero. Alameda Ventures also spent an additional $25 million in March to purchase 100 million STG tokens at an open sale. 

LayerZero Lent Alameda $45M in Feb

LayerZero lent Alameda Research $45 million in February via its promissory note with an annual interest rate of 8%. Early in November, as the FTX problems grew, LayerZero looked for a deal to get its Alameda-owned part back. Another agreement was concluded involving 100 million STG tokens, which LayerZero on November 9 acquired back at a discount for $10 million. However, this transaction was never finalized. Both LayerZero and Alameda Ventures failed to pay for and transfer the tokens.

FTX Seeks to Reboot Operations

Back in August, FTX’s bankruptcy administrator revealed the plans to perhaps start afresh, which may provide another shot to thrive. The plan calls for creating a “rebooted” offshore exchange that would allow individuals to own equity securities, tokens, or other types of interests in the new company. John J. Ray III, the new CEO of FTX, also previously asserted that the company has started the process of reaching out to potential partners to revive the exchange.

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