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’s financial difficulties by initiating a loan recall for a multi-million debt.

“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 entity’s financial difficulties. They claim the company used the opportunity to broker a favorable deal for the firm.

The filing states that the Protocol negotiated a quick sale with Caroline Ellison, who was the CEO of Alameda Research at the time.

This deal allegedly involved Alameda 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. The FTX investment arm transferred a considerably larger amount through last-minute transactions compared to what LayerZero gave.

It explained that LayerZero forgave the $45 million loan and, in exchange, got equity worth nearly $150 million.

Alameda also got a warrant for roughly 2.5% of all Stargate Finance (STG) tokens, which is roughly 25 million STG tokens, as part of the deal.