AVAX Drops 11% After Speculations of Weaponized Litigation

The CEO of Ava Labs said that the claim was “conspiracy theory nonsense.”

AVAX Drops 11% After Speculations of Weaponized Litigation
AVAX Drops 11% After Speculations of Weaponized Litigation

On Monday, the price of the AVAX token fell to its lowest level since July 13. This happened after a website that called itself a “whistleblower” said that Ava Labs, the company behind the Avalanche blockchain, paid lawyers to hurt competitors and keep regulators away.

On Friday, Crypto Leaks, which calls itself a whistleblower, released a report saying that a few years ago, New York-based Ava Labs worked on developing Avalanche’s ecosystem, and law firm Roche Freedman made a deal in which Freedman would collect confidential information about rival companies and use it to bring class-action lawsuits against them in exchange for a lot of AVAX tokens and Ava Labs stock.

From the report:

“We can reveal that the pact directs Roche Freedman and their leader Kyle Roche, to: 1) use the American legal system – gangster style – to attack and harm crypto organizations and projects that might compete with Ava Labs or Avalanche in some way, 2) sue crypto industry actors generally with the aim of creating magnets for regulators such as the SEC and CFTC that distract them from the highly commercial nature of Ava Labs and the Avalanche blockchain, and 3) secretly pursue Emin Gün Sirer’s personal vendettas against individuals.”

Since Friday, the price of AVAX has dropped 22%, from $23 to $17.90. Prices have dropped 11% in the last 24 hours alone. At the time this article was written, AVAX was the only cryptocurrency with a market cap of at least $1 billion that had dropped by more than 10% in the last 24 hours. At the time this article was written, bitcoin, ether, and other major cryptocurrencies were down between 1% and 5%.

The founder and CEO of Ava Labs, Emin Gün Sirer, said that the piece was “conspiracy theory nonsense.”

The report, on the other hand, has caught the attention of industry leaders. Some investors have called the report disturbing, and others wonder if both parties will now have to answer to the law for having a perverse incentive relationship.

In a tweet that has since been deleted, Binance CEO Changpeng Zhao called the report “crazy,” assuming that the videos of evidence posted by Crypto Leaks were real. Zhao said that Binance was the target, even though the centralized exchange is not a direct competitor of Avalanche.

In response to a claim in the Crypto Leaks article that he had, Brad Garlinghouse, the CEO of Ripple Labs, wrote on Twitter Monday that he had “never met or spoken to (much less invested in) Kyle Roche.”

Due to high transaction costs on the Ethereum blockchain, Avalanche became popular with other layers 1 blockchain last year. In 2021, AVAX jumped a huge 3,300% and hit all-time highs of more than $140.

The market as a whole reached its peak in November when the U.S. Federal Reserve switched its attention to controlling inflation and making money tighter. Since then, the market value of cryptocurrencies has gone down from $3 trillion to less than $1 trillion. Bitcoin, the most valuable cryptocurrency on the market, fell below $20,000 early Monday morning. In November, it hit a record high of $69,000.