FTX’s Asset Recovery Attempts Continue With $953M Lawsuit Filed Against Bybit

FTX’s Asset Recovery Attempts Continue With $953M Lawsuit Filed Against Bybit – Amid its own bankruptcy proceedings, FTX is taking legal action against ByBit, aiming to retrieve $953 million in digital assets and cash. The cryptocurrency exchange alleges that ByBit utilized “special privileges” to withdraw the funds shortly before FTX declared Chapter 11 bankruptcy in November. 

Interestingly, despite FTX’s financial challenges, its native token, FTT, witnessed a significant single-day surge of approximately 100% in price this year. Typically, Chapter 11 affords struggling businesses the opportunity to reclaim funds in the months leading up to their bankruptcy filing. This provision aims to prevent specific creditors from receiving unexpected payments merely because they managed to recover their funds while others couldn’t.

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The legal filing, submitted on Friday, November 10, in a Delaware court, alleges that Bybit’s investment subsidiary, Mirana Corp., enjoyed exclusive “VIP” privileges unavailable to regular FTX customers. Mirana is accused of exploiting these benefits to unload a significant portion of its assets from FTX before the platform’s collapse in November 2022. As per the legal claim, Mirana allegedly pressured FTX employees to expedite its withdrawal requests, creating discrepancies as regular FTX clients experienced delays. 

The lawsuit aims to recover assets totaling $953 million, which includes over $327 million purportedly withdrawn by Mirana during the period when the cryptocurrency exchange suspended withdrawals on November 8, 2022. The bankruptcy complaint identifies Bybit Fintech Ltd., Mirana, and an associated crypto trading entity named Time Research Ltd. as defendants. Additionally, a key Mirana official from that timeframe and Singaporean residents implicated in benefiting from or participating in the investigated FTX withdrawals are also named as defendants.

According to Bloomberg, Mirana exerted pressure on FTX staff to expedite its withdrawal requests, creating a contrast with regular FTX clients who faced delays in retrieving funds from the exchange. Notably, Mirana Corp withdrew nearly $327 million of the $953 million after FTX suspended withdrawals. Regarding the lawsuit’s implications for crypto investors, ByBit is yet to respond to FTX’s claims. 

This legal action, initiated by FTX’s new management, is the latest attempt to recover funds dispersed before the company filed for Chapter 11 bankruptcy in November 2022. BFTX asserted that it evaluated the assets taken by Bybit and its affiliates based on November 1 pricing, with potential adjustments as legal proceedings progress. The complaint acknowledges vulnerability to defenses based on subsequent new value. FTX is actively seeking to revive the exchange, with interest from the former NYSE president. Successful recovery of ByBit’s funds could provide substantial financial support for reopening. 

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Meanwhile, FTX has initiated the sale of its Solana tokens to raise funds. In 2023, FTT’s price experienced a remarkable 97% increase within 24 hours, contributing to a cumulative gain of 240% over two days. Despite surpassing a significant obstacle at $4.55, the altcoin’s sustainability is uncertain, possibly influenced by SEC Chair Gary Gensler’s remarks rather than fundamental progress. A potential drawdown could erase recent gains, reducing FTT’s price to $3.00 or $2.42, with breaching the latter level undermining the bullish thesis.

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