FTX has initiated a high-stakes legal maneuver against rival exchange Bybit and its affiliates. This bold action emerges from FTX’s ongoing bankruptcy proceedings. The core of the lawsuit, filed in a Delaware court, revolves around a staggering $953 million. This sum represents funds and digital assets that FTX alleges were improperly withdrawn by Bybit and its investment arm, Mirana Corp.
The VIP controversy at the heart of the lawsuit
Central to FTX’s legal challenge is the assertion that Bybit, through Mirana, had access to “VIP” benefits not available to regular customers. These privileges, FTX contends, enabled Mirana to swiftly move vast sums out of FTX’s platform, a feat that regular customers struggled with as the platform teetered on the brink of collapse. In the hours leading up to FTX’s decision to halt withdrawals in November 2022, more than $327 million was allegedly moved by Mirana. The lawsuit further accuses Mirana of exerting pressure on FTX employees to expedite their withdrawal requests, putting the interests of regular customers at a disadvantage.
Under Chapter 11, a company grappling with bankruptcy can attempt to recover funds transacted in the lead-up to the filing. This provision aims to ensure equitable treatment of all creditors and prevent any undue advantage. FTX’s lawsuit, seeking recovery of the near-billion-dollar sum, is part of a broader strategy by the exchange’s new management. This strategy involves tracking down and reclaiming funds distributed before its Chapter 11 filing. The lawsuit also details the valuation methods used by FTX to appraise the withdrawn assets, hinting at potential legal defenses related to these valuations.
As of now, representatives for Bybit have not commented on the allegations. The case, officially known as FTX Trading Ltd., 22-11068, is set to unfold in the US Bankruptcy Court for the District of Delaware. This legal battle marks a significant chapter in the ongoing saga of FTX’s dramatic downfall and raises questions about the conduct of crypto exchanges during times of crisis. As the case progresses, the eyes of the crypto world and its regulators will undoubtedly be fixed on the outcome and its implications for the industry at large.