The Background of the FTX and LayerZero Relationship
Before things went south for FTX in November, there was a time when Alameda Ventures, the venture capital wing of FTX’s sister company Alameda Research, had invested heavily in LayerZero Labs. Starting from January until May of 2022, Alameda Ventures splurged over $70 million to nab around 4.92% of LayerZero. And don’t forget the $25 million for some shiny new STG tokens. Clearly, they were vibing together, or so it seemed.
Loan Agreements and Liquidation Drama
By February, LayerZero thought it’d be a good idea to loan Alameda Ventures $45 million. I mean, who doesn’t love lending money at an 8% interest rate, right? But when FTX’s house of cards began to tumble in November, LayerZero swung into action, trying to salvage its investments. They proposed a deal to reclaim their stakes, hinging on forgiving that hefty loan. In a twist of fate, it seems LayerZero tried to buy back those 100 million STG tokens for a mere $10 million, but alas, that transaction blew up in everyone’s faces.
The Legal Showdown
Now, we arrive at the juicy part: the lawsuit. FTX claims that LayerZero milked the dire straits of Alameda Ventures, pointing out that they struck a deal with Alameda’s CEO, Caroline Ellison, shortly after the liquidity crisis hit. The lawsuit is essentially saying, “Hey, can we get back our $21 million, please?” This includes funds LayerZero allegedly pilfered just days before the bankruptcy announcement.
What’s at Stake?
In addition to the $21 million from LayerZero Labs, FTX is also gunning for another $13 million from Ari Litan, the ex-COO, and about $6.65 million from the subsidiary known as Skip & Goose. And for a company already in bankruptcy, that’s like lighting a fire under a very shaky chair. With several other suits in the mix and billions to recover, FTX surely has its hands full!
The Ripple Effects of the Lawsuit
This isn’t LayerZero’s first rodeo with FTX drama. With the cryptocurrency world watching (and possibly laughing), this lawsuit could set a precedent for similar altercations in the fast-paced crypto environment. Furthermore, it highlights the volatility of relationships in the crypto sphere — where today’s friends can quickly become tomorrow’s enemies when funds are missing.
