FTX Sues ByBit for Asset Recovery
Bankruptcy advisers at crypto exchange FTX have filed a lawsuit against Bybit Fintech Ltd. to recover digital assets and cash totaling $953 million. The lawsuit alleges that ByBit withdrew all funds just before FTX filed for Chapter 11 bankruptcy in November.
Lawsuit Allegations
The lawsuit, filed in a Delaware court, accuses Bybit’s investment arm, Mirana Corp., of enjoying exclusive “VIP” benefits not available to most FTX customers. Mirana is accused of using these privileges to move most of its assets off FTX before the platform’s collapse.
The complaint claims that Mirana pressured FTX employees to expedite its withdrawal requests, while regular FTX customers faced delays. It aims to recover assets totaling approximately $953 million, including over $327 million allegedly withdrawn by Mirana during the period when FTX paused withdrawals.
FTX’s Legal Action
The bankruptcy lawsuit identifies Bybit Fintech Ltd., Mirana, and a related crypto trading entity called Time Research Ltd. It also includes as defendants a senior Mirana executive from that period and Singaporean residents who gained benefits or played a role in the FTX withdrawals under scrutiny in the case.
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.
FTX’s Funds Recovery Efforts
The legal complaint is the most recent lawsuit initiated by FTX’s new management to retrieve funds disbursed before filing for Chapter 11. FTX assessed the withdrawn assets based on Nov. 1 pricing and mentioned that it might enhance pricing information as the legal proceedings progress.
FTX is working towards reviving the exchange with strong interest from NYSE’s ex-president. Recovering ByBit funds could provide a strong financial power to restart the exchange. Additionally, the exchange has been selling its Solana tokens to bring in more cash.
Hot Take: Legal Battle for Recovery
This legal battle between FTX and ByBit highlights the complexities of asset recovery in the crypto industry and its impact on struggling exchanges like FTX. The outcome could set a precedent for similar cases involving cryptocurrency exchanges and provide insights into effective strategies for asset recovery in such situations.
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