LayerZero boss hits back, claims FTX suit is ‘filled with unsubstantiated claims’

Quick Take

  • LayerZero Labs earlier today became the latest startup to be targeted by the FTX estate, as it tries to undo deals made by the exchange’s former executives.

Bryan Pellegrino, co-founder and CEO of LayerZero Labs, hit back at the FTX estate after it filed a lawsuit earlier today in an effort to claw back tens of millions of dollars from deals struck between the two companies.

“Regarding the FTX suit, the entire suit is filled with unsubstantiated claims,” said Pellegrino in a post today on X, formerly known as Twitter. He claimed that LayerZero Labs, a cross-chain protocol, has proactively tried to address the issue of the ownership of its shares with FTX's liquidators for nearly a year, but has been ignored.

“To see them wait all this time to file a suit filled with unsubstantiated claims leads me to believe the purpose is not to settle the issue but simply prolong the process in hopes of receiving more legal fees,” Pellegrino added.

The FTX estate, led by CEO John Ray III, sued LayerZero earlier today to try to undo a series of deals struck with the startup just before FTX’s collapse.

The suit focused on the deal that allowed Alameda Research, the trading company tied to FTX, to sell back a 5% stake in LayerZero, worth $150 million. In exchange, LayerZero forgave a $45 million loan that it had dished out to Alameda. The suit alleges that, because FTX was already insolvent at the time, the deals constitute fraud and should be reversed.

STG token sales and withdrawals 

Also in question were the re-sale of LayerZero’s STG tokens back to the startup by Alameda, and withdrawals from FTX made in the 90 days before the exchange filed for bankruptcy by LayerZero’s former chief operating officer Ari Litan. The suit claims the two firms enjoyed close ties and that LayerZero staff, their families and dogs were at one point for “several months” hosted by FTX in the Bahamas.

“The fact that there is any sort of claim around preferential information around the withdrawals is easily proven false. First off, I was personally DEPOSITING millions in the month leading up to bankruptcy, including $1M as late as November 7th,” said Pellegrino in his statement on X.

“Additionally, even just a simple look at the large majority of withdrawals show that they were used for simple course of business (primarily to rebalance the gas demands between L1 currencies for the relayer in the most cost efficient manner), not in some sort of panic to remove assets based on asymmetric information,” he continued. “In no way did we know if FTX was insolvent at the time.”

Under Ray III, FTX has filed a flurry of lawsuits in recent months in an attempt to claw back cash it claims was recklessly splashed around by executives at the exchange operator under former CEO Sam Bankman-Fried. In July, the estate filed a lawsuit to try to recover the more than $320 million that was spent on the acquisition of Digital Assets AG, a Swiss startup that became FTX Europe.   

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

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