Cryptocurrency exchange Binance's CEO, Changpeng Zhao, commonly known as CZ, is facing allegations of orchestrating a vendetta against rival exchange FTX in a new class action lawsuit filed on 2 October 2023. This legal development coincides with former FTX CEO Sam Bankman-Fried's first day in court, scheduled for today. The lawsuit, filed by Bankman-Fried and joined by other retail customers who suffered losses on FTX, accuses CZ of disseminating false and misleading information about FTX, with the intention of eliminating a competitor and monopolizing the cryptocurrency exchange platform market. The lawsuit seeks accountability for the collapse of FTX entities in November 2022, with total claims from the putative class members exceeding $5 million.
In related news, Binance has made a significant announcement regarding the future of its native stablecoin, Binance USD (BUSD). In an announcement yesterday, Binance revealed its plans to cease all borrowing and lending services related to BUSD by 25 October 2023. The decision will also result in the closure of all outstanding BUSD loan and collateral positions. This marks a notable shift in Binance's strategy for BUSD, as the exchange plans to wind down all BUSD-related services by 2024. The decision follows a series of developments, including New York fintech firm Paxos ending its relationship with Binance due to ongoing litigation with the U.S. Securities and Exchange Commission (SEC). BUSD, once one of the largest stablecoins, has seen a significant decrease in market capitalization since its peak in November 2022, and users are encouraged to transition their BUSD holdings to fiat or other cryptocurrencies ahead of the service termination.
Binance CEO Accused of Vendetta Against FTX in Class Action Lawsuit
Binance CEO Changpeng Zhao, commonly known as CZ, is facing accusations of orchestrating a vendetta against FTX cryptocurrency exchange in a class action lawsuit filed on Monday. The lawsuit alleges that CZ's actions contributed to the collapse of FTX entities in November 2022, prompting legal action against the prominent cryptocurrency executive. This development coincides with the commencement of former FTX CEO Sam Bankman-Fried's court proceedings scheduled for today.
The lawsuit was filed by former FTX CEO Sam Bankman-Fried, who intends to hold CZ accountable for the downfall of his cryptocurrency empire. Additionally, California resident Nir Lahav and other retail customers who suffered losses on FTX have joined the lawsuit, collectively seeking more than $5 million in damages.
According to the lawsuit, CZ is accused of disseminating "false and misleading statements" about FTX as part of a broader scheme to eliminate a competitor and monopolize the cryptocurrency platform market. It alleges that CZ did not hesitate to seize an opportunity to harm FTX entities when it presented itself, causing a significant decline in FTX entities' stock prices.
The contentious situation began on 6 November 2023 when CZ announced on the social media platform X that Binance would be liquidating its remaining FTX Token (FTT) holdings. Following this announcement, the price of FTX tokens plummeted, leading to a mass withdrawal of funds by FTX users. This rush for withdrawals eventually resulted in a liquidity crisis for the FTX exchange, prompting them to freeze withdrawals.
On 8 November 2023, CZ committed to a non-binding letter of intent for Binance to acquire FTX to alleviate the liquidity crisis. However, he later backed out, citing "corporate due diligence" and concerns over "mishandled customer funds" and "alleged US agency investigations." Three days later, on 11 November 2023, FTX filed for Chapter 11 bankruptcy protection.
The lawsuit asserts that CZ's actions accelerated the unprecedented collapse of FTX entities, causing significant losses to investors like Lahav and other retail participants. It refers to CZ's public statement following these events, including a "crying emoji captioned by 'Sad day. Tried but...'" as "crocodile tears."
Specific claims featured in the lawsuit include allegations that Binance had already sold $530 million worth of FTT assets a day before publicly indicating its intention to liquidate them. It also claims that Binance was aware of the false and misleading nature of the information it disseminated to the public and that CZ never had a genuine intention to acquire FTX entities.
This lawsuit adds to the growing list of legal challenges faced by Binance and its CEO. Regulatory bodies around the world have been taking measures against the cryptocurrency exchange, which was once the largest by trading volume, and its high-profile leader, CZ.
As this legal battle unfolds, the cryptocurrency industry continues to face increased scrutiny, underscoring the need for transparency, accountability, and adherence to regulations within the cryptocurrency space.
Binance Announces the Cease of BUSD Borrowing and Lending Services by October 25
Meanwhile, in a move that signals a strategic shift in its services, cryptocurrency exchange Binance has announced the discontinuation of borrowing and lending services for its native stablecoin, Binance USD (BUSD), by 25 October 2023. The decision, outlined in an announcement made yesterday, will see the closure of all outstanding BUSD loan and collateral positions by the end of the month.
While the termination of BUSD-related services will take place in phases, this latest announcement signifies a significant step in Binance's plan to wind down its support for BUSD. Previously, on 13 February 2023, New York fintech firm Paxos, the issuer of BUSD, announced the cessation of its relationship with Binance due to the ongoing litigation between Binance and the U.S. Securities and Exchange Commission (SEC).
Paxos communicated its intentions to halt redemptions from BUSD to underlying U.S. cash and Treasuries by February 2024, with the temporary cessation of new BUSD minting. Binance, in response to these developments, has decided to discontinue BUSD-related services entirely by the same year.
Prior to this announcement, BUSD was among the largest stablecoins in the cryptocurrency market, reaching a peak market capitalization of $23 billion in November 2022. However, it has since experienced a significant decrease in market capitalization and currently stands at $2.23 billion.
The termination of BUSD services has been rolled out in phases, with Binance suspending BUSD withdrawals via BNB Chain, Avalanche, Polygon, Tron, and Optimism last month. However, BUSD deposits remain accessible across all supported blockchains. Binance is encouraging its users to convert their BUSD balances into fiat or other cryptocurrencies before the upcoming service termination deadline in 2024.
While Binance has ceased BUSD-related services, users on the platform will still have the option to borrow and lend using other stablecoins such as Tether (USDT), Dai, TrueUSD (TUSD), and USD Coin (USDC). Currently, Binance offers an estimated annual percentage yield of 3% for lending BUSD.
This move by Binance reflects the evolving landscape of the cryptocurrency industry and the strategic decisions made by major exchanges in response to regulatory and market dynamics. It also underscores the importance of users staying informed about changes in cryptocurrency services provided by platforms to ensure a smooth transition and management of their assets.
Price Overview
At press time, the native token for the Binance ecosystem, Binance Coin (BNB), seems to have responded negatively to these latest developments. Data from CoinStats indicated that BNB’s price had dropped 2.13% over the past 24 hours. Consequently, the exchange’s token was changing hands at $211.1.
Price chart for BNB (Source: CoinStats)
This 24-hour loss also resulted in BNB’s weekly performance dipping into the red zone. As a result, the altcoin’s price was down 0.98% over the past 7 days as well.
