Binance, a prominent cryptocurrency exchange, currently faces a legal challenge, as reported by Bloomberg. The lawsuit contends that Binance has breached both securities regulations and competition laws in its efforts to dominate the cryptocurrency platform market.
The lawsuit centers around a series of tweets issued by Binance’s CEO, Changpeng “CZ” Zhao, in early November, just prior to the decline of FTX, another cryptocurrency platform. These tweets are alleged to have significantly influenced the outcome for FTX.
Zhao is accused of inciting a mass withdrawal of customers from FTX by expressing concerns about the FTX-issued cryptocurrency token, FTT. On November 6, Zhao disclosed Binance’s decision to divest its holdings in FTX’s utility token, FTT.
Nir Lahav, a cryptocurrency investor, filed a proposed class action on Monday in the U.S. District Court for the Northern District of California, asserting that Binance violated the Securities Exchange Act and California’s Unfair Competition Law by obstructing the operations of competing trading platforms owned by entities affiliated with rival FTX. (Case: Lahav v. Binance Holdings Limited, N.D. Cal., No. 4:23-cv-05038, 10/2/23).
The class action aims to encompass all individuals who invested in FTX between November 6, 2022, and November 8, 2022, a period characterized by significant market volatility. FTX declared bankruptcy the previous year after Binance abandoned its acquisition plan.
In a separate development, Sam Bankman-Fried, the former CEO of FTX, is slated to face trial on Tuesday on charges of misappropriating billions of dollars from users of his FTX cryptocurrency exchange. This comes over a year after FTX’s collapse, which sent shockwaves through the financial markets and tarnished Bankman-Fried’s reputation.
According to federal prosecutors, the 31-year-old former billionaire allegedly embezzled funds from FTX clients from the platform’s inception in 2019 until its bankruptcy in November 2022. He purportedly used these ill-gotten gains to support his hedge fund, Alameda Research, acquire luxurious properties, and for other personal purposes.