FTX Estate Launches Suit Against Bybit Over Alleged Fund Misappropriation

In a legal drama that could rival the most gripping financial thrillers, the estate of the now-defunct cryptocurrency firm FTX has launched a formidable legal battle against the renowned exchange platform Bybit. The stakes are nothing short of astronomical, with the FTX estate aiming to recover a jaw-dropping $953 million, alleging a startling case of “misappropriated funds.”

This unfolding saga takes on a twist, with prior attempts by the FTX estate to reclaim lost assets taking an unconventional turn. Lawsuits were not only directed at former FTX executives but even extended to the parents of Bybit’s founder, Sam Bankman-Fried.

The narrative takes center stage in a Delaware courtroom, where the legal complaint targets Bybit Fintech Ltd., its investment arm Mirana, and key individuals, including Sean Tan, an executive at Mirana. What comes to light is a financial chess game, where Mirana’s investment unit stands accused of receiving substantial transfers from FTX.com totaling an eye-watering $838 million. What adds a layer of intrigue to this legal tapestry is the revelation that around $500 million of these transfers occurred in the tense days leading up to FTX’s unexpected decision to halt withdrawals on November 8, 2022.

The numbers, staggering as they are, are not the sole focus of this courtroom drama. The legal complaint paints a vivid picture of an additional $115 million in digital and fiat assets finding their way to entities and individuals closely associated with Bybit and Mirana. The plot thickens as it is alleged that over $61 million of these assets were withdrawn in the final days before FTX.com and FTX US disabled withdrawals, raising eyebrows and prompting questions about the timing and nature of these transactions.

In a revelation, the FTX estate claims that Bybit was bestowed with VIP status on the FTX exchange. The lawsuit suggests that, in the tumultuous days leading up to FTX’s formal declaration of bankruptcy, Mirana and its affiliates engaged in a frantic withdrawal of assets from their FTX accounts. According to the complaint, Mirana allegedly wielded its VIP connections to apply pressure on FTX Group employees, urging them to hasten withdrawal requests. This, in turn, is said to have depleted the available funds, leaving non-VIP customers in the lurch as they sought withdrawals.

Adding an element of corporate espionage to the plot, the lawsuit alleges that FTX employees played a part in the drama by reportedly altering Mirana’s Know-Your-Customer (KYC) settings multiple times in the days leading up to the suspension of withdrawals. This suggests a level of orchestration or strategic maneuvering, heightening the intrigue surrounding this legal showdown.

The primary objective of this legal drama is to recover assets that the FTX estate claims were either “preferentially” or “fraudulently” transferred to Bybit and its affiliates. These assets are now purportedly “held hostage” by the recipient entities, setting the stage for a courtroom clash of epic proportions.

Amidst this financial theater, broader accusations against FTX’s former management emerge, accusing them of misappropriating customer funds. Both the estate’s new management and the U.S. government are actively involved in unraveling the layers of this complex narrative. In a stunning turn of events, Sam Bankman-Fried, the founder of Bybit, recently faced legal consequences, being found guilty of fraud against FTX customers by a New York jury. As the legal saga unfolds, Bankman-Fried faces an uncertain future, with potential jail time looming as he awaits sentencing next year.