Bankruptcy lawsuit targets Bybit Fintech Ltd over alleged asset withdrawals from FTX

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11th November 2023 – (New York) FTX’s bankruptcy advisers have filed a lawsuit against crypto exchange Bybit Fintech Ltd and two affiliated companies, seeking the recovery of cash and digital assets valued at approximately $953 million. The assets were allegedly withdrawn from Sam Bankman-Fried’s crypto exchange prior to its Chapter 11 filing a year ago.

The lawsuit, filed in a Delaware court on Friday, claims that Bybit’s investment arm, Mirana Corp., enjoyed special “VIP” benefits not available to most FTX customers. It is alleged that Mirana utilized these privileges to remove the majority of its assets from Bankman-Fried’s platform before its collapse in November 2022.

According to the complaint, Mirana exerted pressure on FTX employees to fulfil its withdrawal requests while regular customers experienced lengthy delays in attempting to withdraw funds from the collapsing exchange. The lawsuit aims to recover assets valued at approximately $953 million, including over $327 million that Mirana allegedly withdrew from FTX between the early morning of November 7 and November 8, 2022, when FTX suspended withdrawals.

Representatives for Bybit have not yet responded to requests for comment on the lawsuit, while an FTX spokesperson declined to provide a statement.

The bankruptcy lawsuit names Bybit Fintech Ltd., Mirana, and affiliated crypto trading firm Time Research Ltd. It also identifies a senior Mirana executive at the time and Singaporean residents who the complaint alleges either benefited from or played a role in the FTX withdrawals, which are the subject of the bankruptcy suit.

Chapter 11 bankruptcy typically grants failed companies the ability to recover funds in the months leading up to the bankruptcy filing. This provision aims to prevent certain creditors from receiving an unfair advantage solely because they were able to withdraw their funds from the failing business while others were unable to do so. The Bybit complaint represents the latest legal action taken by FTX’s new management to reclaim funds disbursed prior to the Chapter 11 filing in November of the previous year.

FTX stated in the lawsuit that it assessed the value of the assets withdrawn by Bybit and its affiliates based on November 1 pricing, with the possibility of supplementing pricing information as the litigation progresses. The complaint also noted that some of the legal claims may be subject to “subsequent new value” defences.

The case, identified as FTX Trading Ltd., 22-11068, is being heard in the US Bankruptcy Court for the District of Delaware.