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FTX Filed a Lawsuit Against LayerZero Labs to Recover $21 Million Funds


FTX, one of the world’s largest cryptocurrency exchanges, sued LayerZero Labs, a blockchain development firm offering a trustless decentralized finance solution.

The plaintiff claims that the defendant’s actions were fraudulent and violated its operational terms and conditions of service.

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LayerZero Labs Leveraged Inside Information to Make Withdrawals from FTX


FTX asserted that LayerZero had access to sensitive information about its security protocols and operations under a partnership agreement.

The cryptocurrency exchange firm noted that LayerZero breached the good faith and fiduciary obligatory agreement by leveraging internal information to withdraw money from FTX.

It claimed that LayerZero Labs withdrew $21 million of its funds on September 8, 2022, just before the FTX said it was suspending withdrawals due to a “network congestion” issue.

According to FTX, the withdrawal from its exchange platform led to enormous losses, affecting both its users and itself, as it impaired the exchange’s stability and liquidity.

Again, FTX charges LayerZero Labs with spreading disinformation and false allegations about the solvency of the exchange and its integrity to tarnish the firm’s reputation and lose market share.

The crypto exchange also claims that LayerZero Labs has to pay it punitive and compensatory damages and a court order prohibiting it from further access to or disclosing confidential information about FTX.

FTX will Always Resort to Legal Processes to Protect Its Interests

In August 2023, FTX’s current CEO stated that the company will not give chance to any “unethical or unlawful conduct” by its competitors or partners.

He noted that the crypto firm is ready to take legal processes to guard its interests and rights.

However, LayerZero Labs says it acted in its defense and tried to stop FTX from taking money from it.

It claimed to have noticed that FTX was suffering from a network congestion problem that was denying or delaying some withdrawal requests.

LayerZero Labs blames FTX for neglecting to fix the technical issue, which poses a serious risk to its funds.

Recall that on September 7, 2022, LayerZero Labs announced that it was withdrawing all its assets from the exchange due to concerns about its security and reliability.

However, FTX disputes these claims and strongly argues that LayerZero Labs breached its terms of service and acted in bad faith.

Although FTX acknowledged that it experienced a network congestion issue on September  7, 2022, it claims that an external factor beyond its control caused it.

It noted that the cause was a significant surge in gas fees on the Ethereum Network.

FTX said this technical problem impacted all Ethereum-related transactions, not just FTX withdrawals, and was resolved within hours.

Furthermore, the exchange platform claimed that it informed its users of the issue and urged them to exercise patience as it worked to fix the problem.

It argues that LayerZero Labs disregarded that guidance and took advantage of the situation by filing several withdrawal requests quickly to circumvent FTX’s security controls and withdraw more money than it was eligible for.

According to FTX, this conduct breached the terms of the contract and was fraudulent, resulting in losses for both FTX and its users.

















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