FTX sues to recover $21 million from LayerZero Labs

• The lawsuit focuses on a deal allowing Alameda Research to sell back a 5% stake in LayerZero.
• The lawsuit also draws attention to an unfinished deal involving 100 million STG tokens, which LayerZero pledged to buy back at a $10 million discount.
• Pellegrino, the CEO of LayerZero, thinks the action is intended to drag out the court case in order to rack up more legal bills.

In an effort to recoup $21 million, the bankrupt cryptocurrency exchange FTX has filed a lawsuit against LayerZero Labs, a business that develops cross-chain protocols.

According to the lawsuit, LayerZero Labs withdrew these monies in violation of the law just before FTX filed for bankruptcy in November 2022. The transactions were between LayerZero Labs and Alameda Ventures, the venture capital division of FTX’s sibling business Alameda Research and they occurred between January and May 2022.

LayerZero Labs objects to the accusation

In response to the lawsuit, LayerZero Labs CEO Bryan Pellegrino said on X (formerly Twitter) that the lawsuit is full of unsupported assertions.

Regarding the FTX suit, the entire suit is filled with unsubstantiated claims. We have been in communication with the FTX liquidators for almost a year now and have time and time again attempted to proactively address the issue of ownership of the shares with them and have been…

— Bryan Pellegrino (@PrimordialAA) September 11, 2023

Additionally, according to Pellegrino, LayerZero Labs has been attempting to discuss the matter of share ownership with FTX’s liquidators for almost a year but has received no response. Pellegrino thinks the action is intended to drag out the court case in order to rack up more legal bills.

The complaint is centred on an arrangement that permitted Alameda Research to resell a 5% share in LayerZero, worth $150 million, in return for LayerZero forgiving a $45 million debt.

The lawsuit also draws attention to an unfinished deal involving 100 million STG tokens, which LayerZero pledged to buy back at a $10 million discount but never did. In order to negotiate a fire-sale transaction within 24 hours, LayerZero allegedly took advantage of Alameda Ventures during a liquidity crisis, according to FTX.

Pellegrino refuted the assertion of preferential information regarding the withdrawals in his statement on X. He emphasized that it would be simple to refute this assertion. In the month preceding bankruptcy, he disclosed that he had personally deposited millions of dollars, including $1 million as recently as November 7.