FTX has taken legal action against LayerZero Labs in a bid to recover a staggering $21 million. These funds are claimed to have been unlawfully withdrawn just before FTX’s shutdown in November.
The Backstory: Alameda Ventures and LayerZero Transactions
The legal dispute stems from a series of transactions that occurred between January and May 2022. It involved Alameda Ventures, the venture capital arm of Alameda Research (FTX’s sister company), and LayerZero.
Court documents filed on Sept. 9 reveal that Alameda Ventures initiated two transactions, collectively amounting to over $70 million, securing a stake of approximately 4.92% in LayerZero.
Additionally, in March, Alameda Ventures made another substantial investment of $25 million in 100 million STG tokens through a public auction. These tokens were slated for distribution over a six-month period starting in March 2023.
Amid these financial moves, in February, LayerZero extended a loan of $45 million to Alameda Ventures’ parent company, Alameda Research. This was under a promissory note carrying an annual interest rate of 8%.
The Unraveling of Agreements and FTX’s Allegations
When FTX faced its crisis in early November, LayerZero sought to renegotiate its agreements with Alameda. This included the return of shares to LayerZero in exchange for forgiving the $45 million loan. Simultaneously, another agreement pertaining to the 100 million STG tokens was in play. LayerZero aimed to repurchase these tokens at a discounted rate of $10 million on Nov. 9.
However, this transaction never came to fruition as LayerZero did not complete the purchase. Also, Alameda Ventures did not transfer the tokens.
In the lawsuit, FTX alleges that LayerZero took advantage of Alameda Ventures during a liquidity crisis, stating,
“LayerZero was well aware that Alameda Research was facing a liquidity crisis and, within about 24 hours, negotiated a fire-sale transaction with Caroline Ellison, Alameda Research’s then-CEO.”
Seeking Recovery and Cancellation of Agreements
FTX’s legal action seeks to achieve two primary objectives. One is the cancellation of the agreements between Alameda Ventures and LayerZero. The other is the recovery of funds that were withdrawn shortly before FTX filed for bankruptcy.
These funds include approximately $21.37 million from LayerZero Labs, $13.07 million from Ari Litan, its former chief operating officer, and $6.65 million from a subsidiary known as Skip & Goose.
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