FTX Allege LayerZero Capitalized On Alameda Research Struggles

In a recent court filing, the FTX Debtors assert that bridge protocol LayerZero exploited Alameda Research’s precarious financial situation mere hours before the day of bankruptcy.

“In a November 10, 2022 letter to its investors, LayerZero all but admitted to exploiting Alameda Ventures,” the filing stated.

LayerZero Noticed Alameda Research Struggling

A recent FTX court filing indicates that LayerZero sought to benefit from FTX’s sister company financial difficulties by demanding the immediate repayment of a multi-million-dollar loan.

“LayerZero sought to capitalize on Alameda Research’s distressed financial position by demanding immediate repayment of its $45 million loan to Alameda Research.”

The debtors further allege that LayerZero was well aware of the financial difficulties. They claim the company used the opportunity to make an advantageous deal for the firm.

“In approximately 24 hours, they negotiated a quick sale with Caroline Ellison, who was the CEO of Alameda Research at the time. This deal involved Alameda Ventures supposedly transferring its entire 4.92% equity stake in LayerZero to LayerZero in exchange for forgiving the $45 million loan owed by Alameda Research.”

LayerZero got a much better deal than the investment firm, according to the filing. Alameda transferred a considerably larger amount through last-minute transactions compared to what LayerZero gave back to Alameda Ventures.

It explained that in return for LayerZero forgiving a $45 million loan, it received equity valued at nearly $150 million. As well as a warrant entitling Alameda Ventures to receive approximately 2.5% of the total supply of all Stargate Finance (STG) tokens “minted, generated, or created, or approximately 25 million STG tokens.”