Bankrupt crypto exchange FTX, in an attempt to recover assets worth nearly $1 billion in funds, has filed a lawsuit against Fintech firm Bybit, and its investment arm Mirana.
The lawsuit filed in a Delaware Court, seeks both compensatory and punitive damages from ByBit, centering around a token scheme and assets held on its platform.
The lawsuit claims that Bybit imposed limitations on the FTX estate, preventing the withdrawal of assets exceeding $125 million on the Bybit exchange. It added that Bybit is using these assets as leverage to seek recovery for a remaining balance of $20 million that it could not withdraw from FTX before its collapse.
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“After the FTX.com exchange halted customer withdrawals, ByBit seized FTX Group assets held on Bybit’s exchange, refusing to release them unless and until Mirana was able to finish withdrawing the entire balance of its FTX.com account”, the lawsuit alleged.
Following the recent lawsuit slammed on ByBit, the crypto community awaits ByBit’s response and defense. The Fintech firm, which is a prominent player in the crypto exchange landscape, is expected to counter the allegations put forth by FTX.
Analysts suggest that the legal battle between these two major platforms could set a precedent for accountability within the crypto industry and shed light on the complexities surrounding asset withdrawals and inter-platform transactions.
This lawsuit represents the latest move in TX’s ongoing legal battles as it seeks to navigate the complexities of Chapter 11 bankruptcy and recover lost assets.
FTX, under the new leadership of CEO John J. Ray III, has since been intensifying efforts to recover funds disbursed before its Chapter 11 filing. It has also initiated Legal actions against various entities, which includes, Kives and his venture capital firm, K5, to reclaim significant funds.
The crypto exchange is also exploring the possibility of reclaiming funds donated to politicians, charitable organizations, and huge sums given to celebrities, such as basketball legend Shaquille O’Neal and tennis star Naomi Osaka, for endorsing the platform, without exercising due diligence.
So far, FTX officials overseeing its bankruptcy have announced the recovery of more than $7.3 billion in cash and other liquid assets that may be used to help repay creditors. FTX lawyers also announced that they had identified more than 9 million creditors, far more than earlier estimates of around 1 million.
The crypto exchange announced an updated plan of sending 90% of distributable funds it has recovered to former customers in its bankruptcy proceedings, but that doesn’t necessarily mean they will get back 90% of the money that they lost.
As the company continues in its fund recovery process, the former CEO Sam Bankman-fried faces decades in jail, after being found guilty on all seven counts in the FTX fraud trial.
He is reported to have perpetrated one of the biggest financial frauds in American history, a multibillion-dollar scheme that saw him earn the “the king of crypto”.
The prosecution presented evidence that Bankman-Fried’s crypto trading firm Alameda Research received deposits on behalf of FTX customers from the early days of the exchange when traditional banks were unwilling to let it open an account.
Instead of safeguarding those funds, as Bankman-Fried repeatedly pledged to do in public, he used the money to repay Alameda lenders, buy luxurious properties, go on expensive vacations, and made several huge investments and political donations.
Meanwhile, Bankman-Fried continues to maintain his innocence and will continue to fight the charges against him. Interestingly, three of his former friends and colleagues, including his ex-girlfriend Caroline Ellison, pleaded guilty and have agreed to testify against him in hopes of getting a reduction in their jail sentences. His sentencing has been set for 28th March next year.