LayerZero finally settles with FTX after costly legal battle

Cross-chain protocol LayerZero has reached a settlement agreement with the bankrupt FTX estate. LayerZero Labs CEO Bryan Pellegrino confirmed the settlement on X, noting that the agreement cost millions in legal fees.

Although the full details of the settlement are not yet public, it ends the more than two-year-long legal battle between FTX and LayerZero. Under the agreement, the blockchain company will return the original repurchase to the FTX bankruptcy estate.

Pellegrino said:

“After more than two long years and millions in legal fees (lawyers always win) we have reached a settlement agreement with the FTX estate… Original repurchase has been returned to the estate.”

The legal dispute started in September 2023 when the FTX estate alleged that LayerZero had taken advantage of the liquidity crisis at Alameda Research, which led to FTX’s bankruptcy.

LayerZero and Alameda’s venture capital arm, Alameda Ventures, were involved in a series of transactions in early 2022. Alameda Ventures had bought a 5% stake in LayerZero for over $70 million. It also purchased 100 million Stargate (STG) tokens for $25 million and secured a $45 million loan from LayerZero.

Following signs of FTX’s impending collapse, LayerZero agreed with Alameda to buy out the firm’s stake by forgiving the $45 million loan and also bought back the 100 million STG tokens at a $10 million discount.

However, the FTX bankruptcy estate questioned the validity of these repurchase agreements and asked the court to cancel them and reclaim the funds LayerZero and its agents withdrew from the exchange before the bankruptcy.

LayerZero wants to focus on building 

Although LayerZero initially criticized the lawsuit, the firm has decided to settle to end the legal drama. Pellegrino explained that LayerZero considers it a dispute between the firm and other creditors rather than between itself and FTX.

He said:

“Ultimately we decided this was not us vs FTX which is a fight we feel completely justified in, but it was us vs the creditors (which also we are one of).”

With the settlement now complete, LayerZero plans to focus more on building its platform. The CEO also shared an old tweet from 2022 in which the platform stated that it is holding around $107 million in direct cash balance and $27 million in on-chain funds, with 90% in stablecoins.

Despite the positive settlement news, LayerZero ZRO and Stargate STG tokens have decreased over the last 24 hours. ZRO is down 3.62% to $3.708, while STG fell 3.93% to $0.3278. Their drops align with the general market decline as Bitcoin fell 2.35% to $102,000.

FTX settles with K5, withdraws suit to reclaim $700 million 

Meanwhile, FTX has also settled with venture capital firm K5 Global. The bankruptcy estate sued the VC firm in June 2024 to recover $700 million that former CEO Sam Bankman-Fried had transferred in the months leading to FTX’s collapse.

In an official announcement, FTX estate CEO John Ray III described the settlement as mutually beneficial.

He said:

“We are pleased to have reached an agreement with K5. Having spent extensive time with Michael Kives and Bryan Baum, cofounders of K5, it is clear that K5 is a bright spot in the FTX portfolio, and the expected strong performance of their investments will be a key driver in the recovery efforts for our stakeholders.”

However, the settlement has raised concerns among some FTX creditors, who noted that the estate announced the settlement before filing the settlement agreement in court or getting approval. In fact, FTX estate counsel, Sullivan & Cromwell has already filed a motion to voluntarily dismiss the lawsuit.

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