FTX, the bankruptcy estate, has reached a $228 million settlement with Bybit and its investment arm, Mirana.
If approved by the court, this settlement will allow FTX to recover substantial assets for its creditors, adding momentum to its ongoing efforts to resolve financial issues from the collapse in 2022.
The deal, set for a final hearing on November 20, enables FTX to reclaim approximately $175 million in digital assets held on Bybit’s platform and around $53 million worth of BIT tokens from Mirana.
This agreement concludes a high-stakes legal dispute first initiated by FTX in November 2023, where it sought to recover an initial $1 billion from Bybit and Mirana.
The claim accused both parties of using privileged access to withdraw substantial assets just before FTX’s collapse, allegedly bypassing restrictions that left other users unable to retrieve funds.
In the face of a costly legal battle, FTX’s attorneys determined that pursuing a settlement would be more effective, helping expedite the return of assets to creditors.
Source: bloomberglaw.comFTX & Bybit: Legal Battle and the Alleged “VIP” Withdrawals
The settlement arrived almost a year after FTX filed its lawsuit against Bybit and Mirana in a Delaware court. The lawsuit originally sought $1 billion in damages, claiming that Bybit leveraged a “VIP” status to access priority withdrawals in the days before FTX’s insolvency.
According to FTX’s legal team, Mirana and other entities closely tied to FTX executives were able to withdraw over $327 million from FTX when the exchange had already paused withdrawals for most users.
Notably, there are allegations that Mirana pressured FTX staff to expedite withdrawal requests. The filings outlined how Mirana’s transactions were allegedly logged in a proprietary FTX database, showing priority access even when thousands of regular users were prevented from retrieving funds.
FTX’s attorneys further claimed that Bybit’s privileged access allowed it to protect significant holdings while other users faced severe restrictions, many of whom were later classified as creditors.
In the settlement filing, FTX attorneys acknowledged that while they believed their claims were well-supported, the potential for extended litigation posed risks.
They noted that further legal proceedings would be both time-intensive and costly, and securing an expedited settlement aligned with FTX’s mission to restore creditor assets.
Implications of the Settlement for FTX and Its Creditors
If the court approves the settlement, it will bolster FTX’s bankruptcy recovery efforts by adding substantial assets to its pool for creditor repayment.
The estate has already undergone a significant restructuring, with a plan approved in early October to reimburse 98% of creditors at least 118% of their original claims.
The $228 million settlement with Bybit, comprising digital assets and BIT tokens, provides a critical infusion that may help FTX meet these obligations.
The agreement is also a critical step forward for FTX’s liquidators, who manage an expansive array of legal claims and asset recovery operations.
FTX has also seen progress in other lawsuits, including the recent dismissal of a claim against its former legal counsel, Sullivan & Cromwell, which was accused by a group of creditors of overlooking potential fraud during FTX’s operational years.
Recently, FTX and Alameda Research recently unstaked 178,631 SOL tokens (about $28 million) from a wallet associated with the exchange, which has raised concerns about a potential selloff that could impact Solana’s price.
Analysts speculate that these unstaked tokens are likely headed to major exchanges like Binance and Coinbase.
Overall, if the court approves the settlement with Bybit, FTX’s creditors will be closer to recovering some of their losses.
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