LayerZero, a crypto unicorn once backed by the SBF-led FTX, is the latest target of a lawsuit filed by the bankrupt crypto exchange. FTX is seeking to recover $21 million that was allegedly withdrawn just days before its November collapse. The lawsuit centers around transactions that occurred between January and May 2022 involving Alameda Ventures, the venture capital arm of Alameda Research (FTX’s sister company), and LayerZero.
According to recent court documents, Alameda Ventures made two payments totaling over $70 million to acquire a 4.92% stake in LayerZero. Additionally, they purchased $25 million worth of 100 million STG tokens in a public auction, with distribution scheduled to begin in March 2023.
On the other hand, LayerZero provided Alameda Research with a $45 million loan under an 8% annual interest-bearing promissory note. When FTX, led by SBF, faced difficulties, LayerZero sought to recover its stake in Alameda Research through various agreements, including returning the shares in place of the loan and repurchasing 100 million STG tokens for $10 million on November 9.
However, this transaction was never completed. LayerZero did not pay for the tokens, and Alameda Ventures did not transfer them. FTX, now under new leadership, alleges that LayerZero took advantage of Alameda Ventures during a liquidity crisis and quickly negotiated a discounted transaction with Caroline Ellison, then-CEO of Alameda Research.
FTX: LayerZero CEO Responds
In addition to seeking the annulment of the agreement, the lawsuit aims to recover funds withdrawn just before FTX’s bankruptcy filing, including approximately $21.37 million from LayerZero Labs, $13.07 million from former COO Ari Litan, and $6.65 million from subsidiary Skip & Goose.
Bryan Pellegrino, LayerZero’s co-founder and CEO, responded to the allegations in a comprehensive post on X. He refuted claims of insider trading and argued that most withdrawals were part of routine business operations, not driven by privileged information.
Exchanges are [mostly] the same, and banks are [mostly] the same when there is rumour or smoke you exhibit caution until it’s resolved. In no way did we know if FTX was insolvent at the time.
Regarding the STG tokens from the 2021 auction, Pellegrino claimed they attempted to repurchase them but were denied access to the necessary wallet. He dismissed the allegations as unfounded and expressed his willingness to resolve the matter in court.