Key takeaways:
- A lawsuit has been launched against ByBit, its investment arm Mirana, and several executives by the FTX bankruptcy estate.
- ByBit and its executives withdrew assets worth around $1 billion from FTX in total.
A lawsuit has been launched against ByBit, its investment arm Mirana, and several executives by the FTX bankruptcy estate, which CEO John J. Ray III leads.
The goal is to retrieve the funds and digital assets that ByBit removed from FTX just before it collapsed; these assets are estimated to be worth $1 billion.
The lawsuit alleges that shortly before FTX failed, ByBit took substantial amounts of money and digital assets from executives at Mirana, Time Research—another company connected to ByBit—and itself by using its “VIP” access and connections with FTX employees.
Employees of FTX kept note of VIP customers’ withdrawal requests in a spreadsheet called “VIP Request – Prioritise (Settlement)” during the withdrawal issues that occurred in November 2022.
According to the lawsuit, FTX’s settlement team made a considerable deal of effort to prioritize Mirana’s large withdrawals, which led to transfers of more than $327 million to Mirana.
According to reports, ByBit and its executives withdrew assets worth around $1 billion from FTX in total.
According to the lawsuit, ByBit has placed restrictions on the FTX estate, making it impossible for assets valued at more than $125 million to be withdrawn from the ByBit exchange. ByBit is allegedly using these assets as leverage to pursue recovery for the $20 million that it was unable to take from FTX prior to its collapse.
The lawsuit alleges that, while portraying BitDAO as a decentralized organization administered by community members, a ByBit official secretly disclosed to FTX in October 2021 that the business controls BitDAO, now known as Mantle.
In May 2023, ByBit attempted to reverse the transaction with the FTX bankruptcy estate, even though the FTT tokens were only worth roughly $4 million then, compared to the BIT tokens’ estimated $50 million value.
BitDAO quickly changed its name to Mantle and introduced MNT tokens, which BIT holders could convert at a 1:1 ratio after FTX rejected the “illogical proposal.” BitDAO allegedly shut down FTX as it started to convert and conducted a “community vote” to determine whether to prohibit FTX from converting its tokens.
The lawsuit claims that FTX notified ByBit that the action went against Chapter 11 bankruptcy’s automatic stay. The “community vote” went through in spite of this, with votes that appeared to be connected to ByBit officials. Notably, Mirana Ventures, a Mirana company run by David Toh, was identified as the wallet “dtoh.eth,” which cast the fifth-largest vote.
“Compensatory and punitive damages” are being sought from ByBit concerning the token program and the assets stored on its platform.
