FTX under indictment: claims from debtors toward crypto exchange Bybit to recover $935 million

Crypto news: A recent lawsuit brought by authorities overseeing the FTX bankruptcy process aims to recover the sum of $935 million from Bybit. 

Specifically, it is alleged that this considerable sum was transferred to Bybit‘s investment arm and other claimants shortly before FTX filed Chapter 11 in November 2022. 

In addition, Bybit is accused of exploiting FTX’s assets deposited on its platform as leverage, with the intent of forcing the transfer of about $20 million. Let’s see all the details below. 

Investment arm of crypto exchange Bybit involved in financial dispute with FTX

As anticipated, a new lawsuit, filed by the entities overseeing FTX’s bankruptcy process, accuses Mirana Corp, an investment arm of crypto exchange Bybit, of exploiting its “VIP” status to receive the predominant portion of the $935 million transferred shortly before the Chapter 11 filing. 

Specifically, the lawsuit alleges that these transfers were made with the intent to hinder, delay, or defraud FTX’s current or future creditors.

FTX’s bankruptcy trustees argue that multiple transfers to Mirana Corp, Time Research and various individuals should be considered fraudulent under Section 548(a)(1)(A) of the Bankruptcy Code. 

These fraudulent transfers form the legal basis for a claim for restitution of the full amount transferred, plus interest, for the benefit of the debtors’ bankruptcy estate.

According to the lawsuit, Mirana Corp received assets worth $837,815,847, while Time Research got $47,995,279. 

The claim against both entities may be subject, in part, to a ‘new subsequent value,’ but this will depend on the remaining deposits in FTX accounts after the preferential transfers.

The allegations made against Bybit 

In addition, the lawsuit not only accuses Bybit’s investment arm of fraudulent preferential treatment, but also alleges that the crypto exchange platform refuses to honor transfer requests from FTX debtors. 

Instead, it appears that Bybit would seek the release of about $20 million that Mirana Corp failed to withdraw before FTX disabled withdrawals on 8 November 2022.

Bankruptcy trustees say FTX, through entities under its control, holds $125 million in assets at Bybit. 

Although FTX’s ownership of these funds is not in dispute, the lawsuit alleges that Bybit is withholding these assets hoping to influence the bankruptcy process.

In order to ensure the transfer of the funds to the debtors’ assets, FTX bankruptcy trustees have stated that they are prepared to pursue judicial enforcement of their rights in accordance with the Bankruptcy Code.

Backpack exchange launch by some former FTX executives 

Some former FTX executives, including former general counsel Can Sun, a key player in the case against Sam Bankman-Fried, have started a new crypto platform called Backpack. 

The platform, run by Dubai-based startup Trek Labs, aims to introduce a secure and transparent trading model, learning from past mistakes, with a beta version planned for launch.

Backpack Exchange takes an innovative approach to trading, requiring multi-party approval for transactions, giving users more control and visibility over their assets. 

In addition, the platform focuses on “self-custody” portfolios using multiparty computing to provide greater security.

The exchange, led by Sun and another former FTX employee, Armani Ferrante, aims to achieve a valuation in excess of $100 million for a 10% stake. 

In addition, other former FTX employees, including Claire Zhang, Sun’s former deputy, have key roles in the new platform.

Sun, who worked with Dubai regulators and signed a non-prosecution agreement with U.S. authorities after the FTX debacle, helps lend credibility to the initiative. 

Ferrante, meanwhile, who heads the holding company registered in the British Virgin Islands, brings his experience from FTX and his work with digital currency portfolios to the new project, despite the loss of funds in FTX’s collapse.