The plaintiffs have claimed that Zhao’s ultimate goal was to eliminate competition and monopolize the cryptocurrency market. On November 6, Zhao announced the liquidation of Binance’s remaining FTT holdings, valued at $2.1 billion USD. This announcement led to a precipitous drop in the price of FTX tokens, sparking mass withdrawals and a liquidity crisis.
The lawsuit contends that these actions resulted in substantial financial harm exceeding $5 million in total claims. It also points out that FTX was forced to file for Chapter 11 protection following these events.
The case leans heavily on established legal precedents such as guidelines from the Securities and Exchange Commission (SEC) and Supreme Court decisions like the Howey and Reves rulings. This comes as both Binance and FTX face scrutiny from the SEC.
In addition to this lawsuit, Sam Bankman-Fried, CEO of FTX, is involved in a separate legal dispute. The public Twitter feud between the two CEOs adds another layer to this unfolding saga.
The lawsuit against Zhao highlights the potentially severe consequences of social media activity in the rapidly evolving cryptocurrency sector. As this case develops, it is expected to shed further light on the legal boundaries within this industry.
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Source: Cryptocurrency - investing.com
