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FTX launches $953 million lawsuit against Bybit over alleged unfair withdrawals

TL;DR

  • FTX has filed a lawsuit against Bybit Fintech Ltd and Mirana Corp., seeking to recover around $953 million in cash and digital assets withdrawn from its platform before its collapse.
  • The lawsuit alleges that Mirana used its VIP status on FTX to unfairly prioritize its withdrawals over regular customers, especially during the exchange’s insolvency crisis.
  • The case, part of FTX’s Chapter 11 bankruptcy proceedings, aims to ensure equitable distribution of assets among creditors by recovering funds withdrawn before the bankruptcy filing.

FTX has escalated its legal battles by filing a lawsuit against Bybit Fintech Ltd and its investment arm, Mirana Corp. The lawsuit, lodged in a Delaware court, seeks a staggering recovery of approximately $953 million. This amount represents the value of assets and cash that FTX alleges was unfairly withdrawn from its platform by Bybit and Mirana.

At the heart of FTX’s complaint is the accusation that Mirana enjoyed “VIP” benefits on the FTX platform. These privileges were not available to regular customers. FTX claims that Bybit’s investment arm leveraged these advantages to withdraw significant assets from the exchange, particularly during its tumultuous collapse in November 2022. The lawsuit details that more than $327 million was withdrawn between November 7 and 8, 2022, a critical period when FTX had paused all withdrawals.

Bybit’s alleged influence and withdrawal tactics

FTX’s legal action paints a picture of Bybit and Mirana exerting undue pressure on FTX employees. This coercion, FTX alleges, was to prioritize their withdrawal requests over regular customers during the exchange’s insolvency crisis. The complaint suggests that Mirana used its influence to deplete the funds available for other customers’ withdrawal requests.

Under Chapter 11, companies in distress, like FTX, can attempt to recover funds withdrawn before bankruptcy filings. This provision is intended to ensure a fair distribution of assets among creditors. FTX’s lawsuit against Bybit, therefore, aligns with these bankruptcy proceedings, aiming to recoup funds that were allegedly unfairly extracted by Bybit and Mirana.

At this juncture, Bybit’s representatives have not commented on the allegations. Similarly, an FTX spokesman has refrained from commenting on the ongoing legal matter. The lawsuit targets Bybit and Mirana and names Time Research Ltd and several individuals, including a senior Mirana executive and Singaporean residents allegedly connected to the withdrawals.

FTX’s case, titled FTX Trading Ltd., 22-11068, in the US Bankruptcy Court for the District of Delaware, is set to unfold further. The litigation’s progress will likely provide more insights into the valuation of assets and the extent of legal claims. FTX, in its pursuit, will also contend with potential defenses based on the concept of “subsequent new value.”

The unfolding of this lawsuit signals a critical phase in the aftermath of FTX’s collapse.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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