The FTX Bankruptcy Lawsuit Against ByBit
The FTX bankruptcy estate, under CEO John J. Ray III’s leadership, has filed a lawsuit against ByBit, its investment arm Mirana, and several executives. The lawsuit aims to recover nearly $1 billion in cash and digital assets that ByBit withdrew from FTX just before its collapse.
According to the lawsuit, ByBit used its “VIP” access and close relationship with FTX staff to withdraw hundreds of millions from the accounts of Mirana, Time Research, and senior executives as FTX struggled to meet withdrawals in November 2022. FTX employees prioritized Mirana’s “many huge withdrawals,” resulting in over $327 million in transfers to Mirana.
ByBit has also prevented the FTX estate from withdrawing assets worth more than $125 million held on the ByBit exchange, using them as leverage to recover a remaining balance of $20 million it couldn’t withdraw from FTX before its collapse.
The BitDAO Allegations
The lawsuit also claims that ByBit privately admitted to controlling BitDAO while presenting it as a decentralized organization run by community members. ByBit later approached the FTX estate about reversing a token swap transaction despite its significant value advantage at the time.
When FTX rejected the proposal, BitDAO announced rebranding as Mantle and disabled the token conversion process after FTX started converting their tokens. The lawsuit alleges that votes from accounts seemingly linked to ByBit executives helped pass a community vote restricting FTX from converting its tokens.
The lawsuit seeks “actual and punitive damages” from ByBit related to the token scheme and funds held on its exchange.
Hot Take: ByBit Faces Legal Trouble Over Alleged Wrongdoings
In light of the recent lawsuit filed by the FTX bankruptcy estate against ByBit, it seems that legal troubles are mounting for the exchange. The allegations of leveraging VIP access and controlling BitDAO while presenting it as decentralized raise serious concerns about ByBit’s conduct. If these allegations hold true, it could have significant implications for ByBit’s future operations and reputation within the crypto industry.
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