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.”
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The debtors further 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.
