FTX reaches $228 million settlement with Bybit amid bankruptcy efforts News ▸ US ▸ FTX ▸ Bankruptcy
FTX reaches $228 million settlement with Bybit amid bankruptcy efforts
FTX and Bybit settlement resolves $327 million withdrawal dispute amid ongoing bankruptcy.
2 min read
Updated: Oct. 28, 2024 at 11:03 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
FTX has reached a $228 million settlement with crypto exchange Bybit and its affiliates, concluding a lawsuit filed in Nov. 2023 that sought to recover approximately $1 billion in assets. The agreement allows FTX to withdraw $175 million in digital assets held on Bybit’s platform and sell about $53 million in BIT tokens to Mirana Corp., Bybit’s investment arm.
The settlement arises amid FTX’s ongoing bankruptcy proceedings initiated in Nov. 2022. FTX accused Bybit and related entities of exploiting “VIP” access and close relationships with FTX executives to withdraw $327 million in digital assets and cash immediately before FTX’s collapse. These actions were alleged to be preferential and fraudulent transfers subject to recovery under bankruptcy law.
The settlement permits defendants who withdrew funds before the bankruptcy to hold creditor claims equal to 75% of their account balances as of the filing date. This arrangement is expected to generate significant net savings for FTX’s estate by reducing potential allowed claims from the defendants. The agreement is subject to court approval, with a hearing scheduled for Nov. 20, 2024.
FTX recognized the risks and costs associated with prolonged litigation, including enforcement challenges and asset volatility. By settling, FTX secures immediate access to substantial assets, enhancing its ability to distribute funds to creditors. The legal team acknowledged that while they believed their claims had merit, the settlement provided certainty and accelerated asset recovery.
This resolution aligns with FTX’s broader efforts to repay creditors and wind down operations efficiently. Earlier in Oct. 2024, FTX received court approval for its reorganization plan, which aims to distribute at least $12.6 billion to customers with trapped digital assets on the platform. The settlement with Bybit contributes significantly to this objective, adding substantial value to the pool of assets available for distribution.
The lawsuit against Bybit was part of FTX’s strategy to reclaim assets following its Chapter 11 bankruptcy filing. The legal action targeted Bybit Fintech Ltd., Mirana Corp., and associated individuals, alleging that they withdrew assets that should have been part of the bankruptcy estate. By resolving the dispute through settlement, FTX avoids the complexities and expenses of extended litigation, including potential jurisdictional hurdles.
The reorganization plan outlines the distribution of recovered assets to customers and creditors, with the goal of maximizing recoveries. The settlement with Bybit is one of several FTX CEO John J. Ray III negotiated as part of the company’s bankruptcy strategy. These efforts demonstrate the effectiveness of negotiated resolutions in advancing the bankruptcy process.
The court hearing to approve the settlement is pivotal in FTX’s bankruptcy case. If sanctioned, the agreement will facilitate the distribution of recovered assets to creditors, marking significant progress in FTX’s efforts to resolve outstanding claims and conclude its bankruptcy proceedings.
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Liam 'Akiba' Wright
Also known as "Akiba," Liam Wright is a reporter, podcast producer, and Editor-in-Chief at CryptoSlate. He believes that decentralized technology has the potential to make widespread positive change.
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Bybit
Bybit is a cryptocurrency derivative trading platform established in March 2018 and registered in the BVI.
John J Ray III is the Chief Restructuring Officer and now-appointed CEO of FTX, a cryptocurrency derivatives exchange.