FTX Bankruptcy Estate Pursues $1B Legal Suit Against ByBit Over Fund Withdrawals and Token Scheme
Summary:
John J. Ray III, CEO of the FTX bankruptcy estate, has instigated legal action against ByBit, its investment branch Mirana, and several executives concerning the recovery of around $1 billion in funds and digital assets withdrawn from FTX before its demise. The lawsuit alleges ByBit used its "VIP" affiliations to withdraw these assets, and has since imposed limitations on the FTX estate and used held assets as leverage. There are also allegations that ByBit controls BitDAO, leading to a contentious token exchange proposal. The lawsuit seeks compensatory and punitive damages concerning the token scheme and assets held.
CEO John J. Ray III, at the helm of the FTX bankruptcy estate, is instigating a legal battle against ByBit, Mirana - its investment division, and several high-ranking individuals. This legal murmuring emanates from a desire to reclaim funds and virtual assets that ByBit withdrew from FTX ahead of its downfall, with an estimated present-day value of approximately $1 billion. The lawsuit alleges that ByBit utilized its “VIP” status and associations with FTX personnel to extract extensive monetary and digital assets from Mirana, Time Research (a separate body linked to ByBit), plus executives just before FTX's demise. Amidst FTX’s withdrawal challenges in November 2022, FTX team members monitored VIP clients' withdrawal pleas in a spreadsheet termed "VIP Request – Prioritize (Settlement)." The legal filing argues that FTX's settlement squad made exceptional efforts to prioritize Mirana's substantial withdrawals, culminating in transfers exceeding $327 million to Mirana. The total worth of assets extracted by ByBit and its leaders from FTX has purportedly nearly reached $1 billion now. The lawsuit states that ByBit introduced constraints on the FTX estate, barring asset withdrawals surpassing $125 million on ByBit's exchange. It's speculated that ByBit has deployed these assets as a bargaining chip to lobby for recovery of an outstanding balance of $20 million it failed to withdraw from FTX before its downfall. According to the lawsuit, FTX was privately notified by a ByBit official in October 2021 that ByBit oversaw BitDAO, presently branded as Mantle, despite portraying BitDAO as a community-run decentralized organization. Subsequently, in May 2023, ByBit initiated talks with the FTX bankruptcy estate about retracting the transaction, despite the BIT tokens, worth around $50 million at that time, greatly surpassing the value of the FTT tokens, which stood at roughly $4 million then. Following FTX's refusal of this “irrational proposal,” BitDAO expediently rebranded to Mantle, launching MNT tokens for BIT holders to swap at a 1:1 ratio. As FTX embarked on its conversion, BitDAO allegedly paused it and instigated a “community vote” to deliberate on restricting FTX from trading its tokens. FTX reportedly contacted ByBit to declare that this move overstepped the automatic stay in Chapter 11 bankruptcy. Yet, despite this, the “community vote” was approved, with votes seemingly tied to ByBit's executives. Interestingly, the fifth-largest vote originated from the wallet “dtoh.eth,” determined to be Mirana Ventures, a subsidiary of Mirana managed by David Toh. Aimed at ByBit regarding the token plan and the assets resting on its platform, this lawsuit is aiming to secure “compensatory and punitive damages.
Published At
11/12/2023 8:25:28 AM
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