FTX Takes Legal Action Against Bybit to Retrieve Assets Worth Nearly a Billion Dollars


by Oskar Trotman

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FTX bankruptcy consultants are taking to court crypto exchange Bybit Fintech and two of its affiliated companies, attempting to retrieve monetary and digital assets with a total value of $953 million. The lawsuit filed in a Delaware court alleges Mirana, the investment division of Bybit Fintech and its affiliated crypto trading company Time Research, benefited from a preferred treatment not offered to regular FTX customers.

The lawsuit claims that the defendants pressured employers of FTX to expedite their withdrawal requests. At the same time, regular customers had to experience prolonged delays ahead of the FTX downfall at the end of 2022. Bankruptcy advisors state that Miranda withdrew over $327 million from FTX between 7 and 8 November 2022. A time frame during which withdrawals were stopped. The bankruptcy estate also alleges that Bybit has refused to return $125 million held in Bybit accounts.

The value of the assets in question in the lawsuits according to the plaintiffs, was determined by using November 1 pricing, but this is open to change if additional pricing information becomes available during the litigation.

The legal process has a solid base, considering that bankruptcies filed under Chapter 11 enable insolvent enterprises to reclaim assets paid out months ahead of a bankruptcy submission, a provision put in place to stop specific creditors from attaining an unfair upper hand by withdrawing their funds from a failing company, while other clients are not extended the same privilege.

FTX’s Legal Offensive to Recover Funds

The new FTX management has initiated a series of legal actions aimed at reclaiming funds disbursed before the filing of  Chapter 11 in November 2022. Nobody is spared in this legal push, including Bankman-Fried parents, who allegedly “siphoned” millions.

The new leadership of FTX recently revealed they will try to reclaim funds paid out to celebrities such as tennis star Naomi Osaka and former basketball player Shaquille O’Neal, who were paid to endorse the platform.

Donations made by FTX are also targeted by the management, which hopes to recover funds gifted to charitable organizations and politicians. Another company facing legal action is venture capital firm K5, in which Bankman-Fried had invested approximately $700 million.

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Desire to Revamp the Crypto Exchange

After FTX declared Chapter 11 bankruptcy on November 11, 2022, John J. Ray was appointed as the company’s CEO. Ray is not new to managing bankrupt companies and leading attempts to recover funds, such as his stewardship of the Enron bankruptcy in 2004.

Following Ray’s appointment, the new CEO declared before Congress that he had not encountered such a failure of corporate control as the one encouraged at FTX. Aside from efforts to retrieve lost funds, Ray is attempting to find a buyer to relaunch the crypto exchange.

Experts expect the bankruptcy proceedings to be very complex, considering the entangled nature of Bankman-Fried’s crypto empire. The former CEO of FTX, Sam Bankman-Fried, was found guilty of all counts by a jury in a New York federal court in November, with sentencing scheduled for March 28, 2024.

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by Oskar Trotman

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