Binance, the leading crypto exchange, and its top executive, Changpeng Zhao, known widely as CZ, face mounting legal pressures. A California resident, Nir Lahav, brought a class-action lawsuit, alleging market manipulation strategies targeting former rival crypto firm FTX.
Lahav’s main argument revolves around CZ’s tweets from early November, coinciding with a significant period for FTX. CZ announced the divestment of Binance’s holdings in FTX’s token, FTT, on November 6th.
However, the lawsuit claims this information was misleading and carried a malicious undertone. The core of the argument is that Binance had offloaded its FTT tokens before CZ’s public announcement, leading some to believe that the intention behind the tweet was to decrease FTT’s market value.
Controversial Tweets and Market Repercussions
The ripple effect of CZ’s tweet was palpable. Following his announcement, FTT’s value took a sharp dive from US 23.1510 to a startling US 3.1468, pushing FTX into a whirlwind of financial instability leading them to bankruptcy’s doorstep. The tweet hinted at a reluctance to “support individuals who undermine peers covertly,” which many interpreted as a veiled jab at FTX’s CEO, Sam Bankman-Fried, and his regulatory activities.
A Strategy or Isolated Incident?
The lawsuit suggests that these weren’t mere coincidences but deliberate actions by CZ to shake FTX’s foundations. CZ’s influence was made evident by creating market uncertainty around FTX and then retracting from an apparent intention to acquire the struggling company. According to the suit, such maneuvers were aimed at sidelining a strong competitor and solidifying Binance’s dominant position in the crypto market.
Binance’s Market Dominance and FTX’s Fall
After FTX’s market troubles, Binance surged in its ranking, becoming the top crypto exchange, boasting an impressive market share of 62.1%. Before these events, FTX was not far behind, holding a third-place position just after Coinbase. The lawsuit alleges that by deliberately triggering FTX’s financial collapse, Binance eliminated a significant competitor and further strengthened its industry dominance.
The lawsuit is specifically geared towards a defined group. Lahav’s proposed “Nationwide Class” includes any individual or entity in the U.S. who had fiat or cryptocurrency on the FTX platform during the volatile period from November 6 to November 8, 2022. Moreover, a “California Sub-Class” has been defined, focusing exclusively on California residents who engaged with the FTX platform during the same timeframe.
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