FTX Bankruptcy Estate Files Lawsuit Against ByBit and Mirana
The FTX bankruptcy estate, led by CEO John J. Ray III, has taken legal action against ByBit, its investment arm Mirana, and several executives to recover nearly $1 billion in funds and digital assets that were withdrawn from FTX just before its collapse.
The lawsuit alleges that ByBit used its privileged access and connections with FTX staff to withdraw significant cash and digital assets from Mirana, Time Research, and executives during FTX’s November 2022 withdrawal difficulties. According to the suit, over $327 million was transferred to Mirana due to FTX’s efforts to prioritize their withdrawals.
ByBit is accused of imposing restrictions on the FTX estate, preventing the withdrawal of assets exceeding $125 million on the ByBit exchange. The lawsuit also claims that ByBit controlled BitDAO (now Mantle) despite presenting it as a decentralized organization run by community members.
ByBit’s Alleged Token Scheme
In October 2021, a ByBit executive revealed that the company controlled BitDAO, which was later rebranded as Mantle. ByBit approached the FTX bankruptcy estate about reversing a transaction involving BIT tokens valued at approximately $50 million. When FTX rejected the proposal, BitDAO rebranded as Mantle and disabled FTX’s conversion process.
Despite being informed that their actions violated the automatic stay in Chapter 11 bankruptcy, a “community vote” passed, with votes seemingly linked to ByBit executives. The legal action seeks compensatory and punitive damages from ByBit regarding the token scheme and assets held on its platform.
Hot Take: FTX Lawsuit Against ByBit Could Impact Cryptocurrency Industry
The legal battle between the FTX bankruptcy estate and ByBit could have significant implications for the cryptocurrency industry. If successful, this lawsuit could set a precedent for holding cryptocurrency exchanges accountable for their actions and provide greater protection for investors and creditors in the event of insolvency or bankruptcy.
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