The CEO of LayerZero Labs, Bryan Pellegrino, recently made a statement regarding the settlement of a legal dispute with the cryptocurrency exchange, FTX. After two years of litigation and substantial legal costs, the two companies have come to a resolution regarding various transactions made during 2022 with Alameda Ventures, the venture capital arm of Alameda Research.
FTX had initially sought $21 million from LayerZero, asserting that funds were unlawfully withdrawn from FTX’s platform before it collapsed in November 2022. The disagreement also involved an equity stake in LayerZero. Pellegrino stated that LayerZero chose to settle the matter rather than proceed with what would essentially be a dispute between creditors, as LayerZero is also a creditor of the now-defunct FTX. Pellegrino also noted that the initial repurchase has been returned to the FTX estate.
The dispute dates back to 2022 when Alameda Ventures agreed to buy approximately 5% of LayerZero. According to transaction records, Alameda Ventures delivered $70 million to LayerZero and purchased $25 million worth of STG tokens. However, the subsequent bankruptcy of FTX left many companies grappling with already-established deals and expected financial transfers.
LayerZero proposed to repurchase its equity by forgiving a $45-million loan to FTX, a proposition challenged by FTX’s estate, who alleged a “fire-sale transaction”. Moreover, LayerZero planned to repurchase the STG tokens for $40% of their initial price in a separate agreement. However, Alameda never transferred the tokens and no funds were transferred from LayerZero.
Since declaring bankruptcy in 2022, FTX’s debtors have filed numerous lawsuits against other crypto businesses connected to FTX in attempts to recoup funds. Despite certain cases still being in progress, the FTX estate’s reorganization plan came into effect on January 3rd, enabling many claimants with claims less than $50,000 to receive payment within 60 days.
All criminal charges against FTX executives have since been dealt with, resulting in former FTX CEO Sam Bankman-Fried, CFO Caroline Ellison, and co-CEO of FTX Digital Markets Ryan Salame serving lengthy prison sentences. Notably, Sam Bankman-Fried is currently appealing his conviction and 25-year sentence.