FTX Bankruptcy Lawsuit Against Bybit’s Investment Arm
If you’ve been following the latest crypto news, you might have heard about a lawsuit filed by authorities overseeing FTX’s bankruptcy process. The lawsuit aims to recover $935 million from Bybit. It is alleged that this sum was transferred to Bybit’s investment arm and other claimants shortly before FTX filed Chapter 11 in November 2022. Bybit is also accused of exploiting FTX’s assets deposited on its platform as leverage, with the intent of forcing the transfer of about $20 million.
Investment Arm of Bybit Involved in Financial Dispute with FTX
The lawsuit accuses Mirana Corp, an investment arm of Bybit, of exploiting its “VIP” status to receive the predominant portion of the $935 million transferred shortly before the Chapter 11 filing. The transfers were allegedly made with the intent to hinder, delay, or defraud FTX’s current or future creditors. Multiple transfers to Mirana Corp, Time Research and various individuals should be considered fraudulent under Section 548(a)(1)(A) of the Bankruptcy Code.
Mirana Corp received assets worth $837,815,847, while Time Research got $47,995,279. The claim against both entities may be subject, in part, to a ‘new subsequent value,’ but this will depend on the remaining deposits in FTX accounts after the preferential transfers.
The Allegations Made Against Bybit
In addition to fraudulent preferential treatment, the lawsuit alleges that Bybit refuses to honor transfer requests from FTX debtors. Instead, it appears that Bybit would seek the release of about $20 million that Mirana Corp failed to withdraw before FTX disabled withdrawals on 8 November 2022.
FTX holds $125 million in assets at Bybit. Although FTX’s ownership of these funds is not in dispute, the lawsuit alleges that Bybit is withholding these assets hoping to influence the bankruptcy process.
Backpack Exchange Launch by Some Former FTX Executives
Former FTX executives have started a new crypto platform called Backpack. The platform aims to introduce a secure and transparent trading model with multi-party approval for transactions. It also focuses on self-custody portfolios using multiparty computing for greater security. Led by former general counsel Can Sun and Armani Ferrante, Backpack Exchange aims for a valuation in excess of $100 million for a 10% stake.
Hot Take: Implications for Crypto Investors
The ongoing legal battle between FTX and Bybit sheds light on potential risks within the cryptocurrency industry. It underscores the importance of due diligence and regulatory compliance when dealing with crypto exchanges and investments. Furthermore, the launch of Backpack Exchange by former FTX executives signals a continued interest in innovative crypto solutions despite past challenges within the industry.
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