Legal Showdown: FTX Initiates Lawsuit Against Bybit to Recover $953 Million in Alleged 'Misappropriated Funds'

FTX's financial situation post its November 2022 bankruptcy filing has spurred heightened efforts to recover funds it claims were wrongfully diverted to Bybit and its associated entities. Revealed in recent court filings, the FTX estate has initiated legal proceedings against Bybit, aiming to reclaim a substantial amount of $953 million.

Legal documents disclose the estate's contention that the funds were shifted to Bybit and its investment arm, Mirana, under circumstances characterized as "preferential" or "fraudulent." This legal recourse is the latest in a series of endeavors by the FTX estate to retrieve what it perceives as "misappropriated funds." Previous actions have included legal challenges against former FTX executives and even the parents of Sam Bankman-Fried, the exchange's founder.

The recent legal filing, lodged in Delaware, specifically targets Bybit Fintech Ltd., Mirana, and certain individuals, notably Mirana executive Sean Tan. As per the filing, the investment unit received substantial transfers from FTX.com, aggregating to around $838 million. Alarmingly, almost $500 million of these transfers transpired in the days immediately preceding FTX's suspension of withdrawals on November 8, 2022.

The lawsuit additionally alleges an extra transfer of $115 million in digital and fiat assets to entities and individuals linked with Bybit and Mirana. Significantly, over $61 million of these assets were purportedly withdrawn in the final days before FTX.com and FTX US halted withdrawal operations.

The FTX estate contends that Bybit held VIP status on the exchange, claiming that, in the crucial days leading to the bankruptcy filing, Mirana and its affiliates hurriedly withdrew assets from their FTX accounts. The legal complaint asserts that Mirana utilized its VIP connections to pressure FTX Group employees into promptly fulfilling withdrawal requests, thereby depleting the funds available for non-VIP customers of FTX.com.

Furthermore, the lawsuit brings to light allegations that FTX personnel made multiple modifications to Mirana's Know-Your-Customer (KYC) settings in the days preceding the suspension of withdrawals. The FTX estate seeks the restitution of assets it alleges were transferred preferentially or fraudulently to Bybit and its affiliates, characterizing them as presently "held hostage" by the latter.

It is crucial to note that the former management of FTX faces accusations of misappropriating customer funds, both from the estate's new management and the U.S. government. Sam Bankman-Fried, the founder, recently received a guilty verdict for fraud against FTX customers from a New York jury and awaits sentencing next year, potentially leading to imprisonment. The ongoing legal battle unveils the intricate network of accusations and legal actions entwining FTX and its interactions with Bybit.

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