FTX’s bankruptcy estate has sued Bybit and its executives with the goal of recovering $953 million worth of assets.
Following the bankruptcy filing by FTX in November 2022, the company’s new executives have recovered approximately $7 billion worth of assets that could be channeled toward reimbursing affected customers.
However, efforts are still underway to recover more assets, with the bankruptcy estate now pursuing legal action against popular crypto exchange Bybit, its venture arm Mirana, another entity named Time Research, and other executives.
In a Nov. 10 filing with the United States Bankruptcy Court of Delaware, FTX’s estate alleged that Bybit must pay back $953 million worth of crypto assets. FTX claims that Bybit used its privileged position as a “VIP” account holder on FTX to withdraw assets in the days leading to withdrawals being halted on November 8, 2022.
Precisely, Bybit allegedly pressured FTX Group employees to prioritize withdrawals for the exchange, with the employees altering Mirana’s KYC settings on FTX to give the company a front seat on the withdrawal list.
Mirana received crypto assets worth approximately $838 million from FTX through the alleged “fraudulent scheme.” Additionally, Bybit and associated entities obtained crypto and fiat assets worth an estimated $115 million. FTX’s bankruptcy estate claims that most of these withdrawals took place in the “final days” before FTX’s collapse and, thus, should be refunded.
Bybit Allegedly Seizes FTX Funds and Manipulates BitDAO Deal
As part of its complaint, FTX argues that Bybit prevented the bankruptcy estate from gaining access to more than $125 million worth of crypto assets on its platform. Bybit allegedly wants FTX’s bankruptcy estate to refund the $20 million that Mirana had on FTX prior to the platform pausing withdrawals before it can release the remaining funds.
The filing claims that Bybit’s denial of access to the funds violates staying laws, which require the exchange to transfer the assets to FTX. Additionally, FTX labels it as part of “unlawful efforts” by Mirana and Bybit “to privilege themselves above [FTX’s] other creditors.”
Meanwhile, FTX also claimed that Bybit used BitDAO, an entity it promoted as a decentralized autonomous organization (DAO), to devalue millions of dollars worth of crypto assets held by FTX. In the real sense, FTX alleged that Bybit controlled the DAO and championed a proposal that prevented the bankruptcy estate from converting its BIT tokens to MNT after rebranding BitDAO into Mantle.
Affected FTX customers will undoubtedly hope the bankruptcy estate succeeds in its latest quest to clawback funds. Talks of restarting FTX have also re-emerged in recent weeks, further raising hopes of restitution for users.