Bankruptcy advisers at crypto exchange FTX have sued Bybit Fintech Ltd. in order to recover digital assets and cash worth a staggering $953 million. The advisers have alleged that ByBit withdrew all funds just before FTX filed for Chapter 11 bankruptcy last November.
Lawsuit against ByBit
The lawsuit, filed in a Delaware court on Friday, November 10, alleges that Bybit’s investment arm, Mirana Corp., enjoyed exclusive “VIP” benefits not available to most FTX customers. Mirana is accused of leveraging these privileges to move the majority of its assets off FTX before the platform’s collapse in November 2022.
The complaint claims that Mirana, pressured FTX employees to expedite its withdrawal requests, while regular FTX customers faced delays. The legal action aims to recover assets totaling approximately $953 million, including over $327 million allegedly withdrawn by Mirana during the period when FTX paused withdrawals on November 8, 2022.
The bankruptcy lawsuit identifies Bybit Fintech Ltd., Mirana, and a related crypto trading entity called Time Research Ltd. The legal action also includes as defendants a senior Mirana executive from that period and Singaporean residents who, according to the complaint, either gained benefits or played a role in the FTX withdrawals that are under scrutiny in the bankruptcy case.
FTX’s Funds Recovery
Chapter 11 generally provides struggling companies with the opportunity to reclaim funds in the months leading up to a bankruptcy filing. This authority prevents specific creditors from receiving an undue advantage simply because they managed to withdraw their funds from a failing business while others were unable to do so.
The legal complaint filed by Bybit is the most recent lawsuit initiated by FTX’s new management to retrieve funds disbursed before the company filed for Chapter 11 in November 2022.
In the lawsuit, FTX asserted that it assessed the assets withdrawn by Bybit and its affiliates from its exchange based on Nov. 1 pricing. FTX added that it might enhance pricing information as the legal proceedings progress. The complaint also noted that certain legal claims it makes could potentially be subject to defenses related to “subsequent new value.”
Currently, crypto exchange FTX is also working towards reviving the exchange with NYSE’s ex-president showing strong interest in it. If the exchange manages to recover ByBit funds, it can provide a strong financial power to restart the exchange. Besides, the exchange has also been selling its Solana tokens to bring more cash.
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