• Binance and its CEO, Changpeng Zhao, face a class-action lawsuit, accused of using strategic moves to negatively impact competitor FTX and its financial standing.

• The lawsuit suggests that Zhao used social media, particularly Twitter, to disseminate information and impact FTX’s utility token FTT’s market value.

On October 2nd, a class-action lawsuit presented a new arena of dispute between the cryptocurrency giants Binance.US and FTX. The case, brought by California resident Nir Lahav, revolves around allegations that Binance.US and its CEO, Changpeng Zhao, have attempted to monopolize the cryptocurrency market, causing detrimental effects on its competitor, FTX. The allegation accuses Binance of using strategic and communicative tactics to intentionally degrade FTX’s market standing, thereby triggering its financial collapse.

The lawsuit has spotlighted critical events in the weeks leading up to FTX’s downfall. A key argument supporting Lahav’s legal position focuses on a string of tweets Zhao sent on Twitter. These posts, coinciding with a sharp decline in the value of FTX’s utility token FTT from $23.1510 to a mere $3.1468, are alleged to have been calibrated to incite market reactions that would lead to FTX’s eventual financial instability and precipitous collapse.

An Offer of Acquisition, Followed by a Hasty Withdrawal

Zhao publicly informed the market of Binance’s intention to acquire FTX through a Twitter post. However, Lahav argues that retracting the offering just a day later was a deliberate move to create instability and diminish confidence among FTX’s investors and the broader market.

The suit points towards a deliberate misinformation tactic, further highlighted through a tweet on November 6th where Zhao declared Binance’s intention to liquidate its FTT holdings. According to the plaintiffs, not only had Binance already divested its FTT holdings before this statement, but the declaration was strategically designed to depress the price of FTT in the market. 

The misalignment between Zhao’s statement and Binance’s actions forms a cornerstone of the legal challenge, pinning a manipulative intent on the statements issued by Binance’s CEO.

Navigating Through the Implications of Regulatory Efforts and Market Dynamics

Interestingly, a deeper undercurrent runs through this legal battle, extending into regulatory efforts within the cryptocurrency industry. The suit implies opposition from Binance towards FTX CEO Sam Bankman-Fried’s regulatory efforts. One of Zhao’s tweets, expressing general opposition to individuals who covertly lobby against other industry players, allows this inference. If proven to be substantiated, the implications of such a stance could weave a complex tapestry of competition and regulatory maneuvering within the industry.

The community’s response to this ongoing battle has been notably divergent. While CZ and Binance have found significant support within various circles of the cryptocurrency community, others, including notable American author Michael Lewis, have expressed a contrary viewpoint. Lewis stated on 60 Minutes that if no one had maliciously undermined the business, FTX could have avoided its downfall, implying a potentially orchestrated descent into financial ruin.

Amid these turbulent legal waters, Binance and CZ have yet to officially respond to the lawsuit and the allegations directed towards them. At the same time, Binance and FTX remain under scrutiny from the Securities and Exchange Commission (SEC). The lawsuit will navigate through a dense web of regulatory and legal frameworks, potentially setting a precedent and shaping future dialogues surrounding competition, strategic communication, and regulation within the cryptocurrency market.