Bankrupt cryptocurrency exchange FTX has filed a lawsuit against LayerZero Labs, an interoperability protocol that allows decentralized applications to be developed across multiple blockchains.
The lawsuit alleges LayerZero Labs illegally siphoned $21 million from FTX using tips from insiders just before the exchange crashed, disabling withdrawals.
The lawsuit was filed on September 9, 2023 by the newly appointed CEO of FTX, who is leading legal action against LayerZero Labs. The lawsuit alleges LayerZero Labs breached its contract and fiduciary duty with FTX, as well as committing fraud and unjust enrichment.
According to the lawsuit, LayerZero Labs received $135 million in a funding round co-led by FTX Ventures in March 2023, bringing its initial valuation to $1 billion. Other investors in the round included Andreessen Horowitz, Sequoia, Coinbase Ventures and PayPal Ventures.
As part of the deal, LayerZero Labs agreed to retain $11.5 million in FTX for operational purposes. However, the lawsuit claims that LayerZero Labs withdrew the entire amount on November 9, 2022, using inside information that FTX was about to collapse.
*Not investment advice.