FTX Sues Bybit for $953 Million in Crypto Assets
FTX, a crypto exchange that filed for bankruptcy in November 2022, is suing its rival Bybit for allegedly withdrawing $953 million worth of cash and digital assets from FTX before its collapse. FTX claims that Bybit’s investment arm, Mirana, used its “VIP” status to pressure FTX staff to process its withdrawal requests faster than other customers, who faced delays and restrictions.
FTX is seeking to recover the funds under Chapter 11 bankruptcy law, which allows failed businesses to claw back payments made to certain creditors in the months before filing for bankruptcy.
The Background of the Lawsuit
The lawsuit, filed on Friday in a Delaware court, accuses Bybit, Mirana, and a related crypto trading firm called Time Research of exploiting FTX’s financial troubles and violating its terms of service. A former Mirana executive and some Singaporean residents are also named as defendants in the case.
According to the complaint, Mirana was a long-time customer of FTX and had a privileged “VIP” status that gave it access to special features and benefits, such as lower fees, higher leverage, and faster withdrawals. Mirana allegedly abused these advantages to offload the majority of its assets from FTX before the platform’s demise in November 2022.
FTX alleges that Mirana withdrew over $327 million from FTX after the exchange halted withdrawals on November 8, 2022, and that it based its claim on the prices of the assets on November 1, 2022. FTX says it may update the price information as the litigation progresses.
FTX also alleges that Mirana pressured FTX staff to expedite its withdrawal requests, while regular FTX customers encountered delays and restrictions. FTX claims that Mirana threatened to sue FTX or expose its financial situation to the public if it did not comply with its demands.
FTX further alleges that Bybit, Mirana, and Time Research conspired to transfer the assets from FTX to Bybit and other platforms, and that they used various techniques to conceal their identities and transactions. FTX says that it discovered the scheme through its internal investigations and forensic analysis.
The Implications of the Lawsuit
Bybit has not yet responded to the lawsuit or the allegations. The lawsuit is the latest legal action taken by FTX’s new management to recover funds that were dispersed before the exchange’s bankruptcy. FTX’s native token, FTT, surged by more than 100% on the day of the lawsuit, reaching $5.8.
The lawsuit also raises questions about the security and transparency of the crypto industry, especially in the context of the recent wave of hacks, scams, and regulatory crackdowns. The lawsuit highlights the risks and challenges that crypto investors and traders face when dealing with unregulated and volatile platforms.
