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In a significant legal development, FTX’s bankruptcy advisers have taken robust legal action against Bybit Fintech and its associated entities, seeking the recovery of a substantial sum totaling approximately $953 million in cash and digital assets. This lawsuit, recently filed in a Delaware court, brings to light allegations of privileged treatment and sizeable asset withdrawals by Bybit’s investment arm, Mirana Corp., just before FTX’s Chapter 11 filing a year ago.
VIP Privileges Exploited
The crux of the lawsuit revolves around claims that Mirana Corp. enjoyed exclusive “VIP” benefits that were not accessible to the majority of FTX customers. The complaint contends that Mirana utilized these privileges to orchestrate a significant withdrawal of assets from Sam Bankman-Fried’s FTX exchange, a move that allegedly transpired shortly before the exchange’s collapse in November 2022.
Pressure on FTX Employees
According to the legal filing, Mirana exerted pressure on FTX employees to expedite its withdrawal requests, creating a scenario where regular FTX customers were left waiting for hours to access their funds as the exchange faced imminent collapse. The suit emphasizes the disparity in treatment between Mirana and other customers during this critical period.
Lawsuit Seeks Asset Recovery
The primary objective of the lawsuit is to recover assets amounting to approximately $953 million. This includes more than $327 million allegedly withdrawn by Mirana from FTX between the early morning of November 7 and November 8, 2022, a crucial time when FTX temporarily paused withdrawals. The defendants named in the bankruptcy lawsuit include Bybit Fintech Ltd., Mirana, and affiliated crypto trading firm Time Research Ltd.
Chapter 11 Provisions
Chapter 11 bankruptcy provisions, designed to prevent unfair advantages for certain creditors, grant failed companies the opportunity to recover funds in the months leading up to the filing. FTX has valuated the assets withdrawn by Bybit and its affiliates using November 1 pricing, with the possibility of supplementing pricing information as the litigation progresses. The complaint acknowledges that some legal claims may be subject to “subsequent new value” defenses.
FTX’s Broader Legal Pursuits
This lawsuit against Bybit is just the latest in a series of legal actions initiated by FTX’s new management to reclaim funds disbursed prior to its Chapter 11 filing in November of the previous year. The company has also taken legal action against Kives and his venture capital firm, K5, in an effort to recover the estimated $700 million invested by Sam Bankman-Fried. The complaint characterizes Bankman-Fried as a “profligate patron” who sent millions to Kives, K5 Global, and Baum after attending a social event hosted by Kives in 2022.
Recovery Efforts Extend Beyond Bybit
In addition to pursuing Bybit, FTX has actively sought the recovery of funds donated to politicians and charitable organizations, including the Metropolitan Museum of Art in New York. Recent disclosures from the company’s advisers indicate ongoing investigations into the possibility of reclaiming millions of dollars paid to celebrities, such as Shaquille O’Neal and Naomi Osaka, for their endorsements of the platform. FTX is evidently ramping up its efforts to recover lost funds through various legal avenues.
As FTX intensifies its legal endeavors to recover funds lost prior to its Chapter 11 filing, the outcome of this lawsuit against Bybit Fintech will undoubtedly be closely watched within the crypto and financial communities. The intricacies of the allegations, coupled with the broader legal landscape surrounding FTX, add another layer of complexity to this unfolding financial drama.
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