The legal dispute between the collapsed U.S. crypto exchange FTX and Dubai-based Bybit has recently reached a significant milestone with a settlement agreement worth $228 million. Here’s an overview of the background, context, and latest developments. The settlement comes just in time for the expected bull run in the crypto segment.
Background
FTX, once a major crypto exchange founded by Sam Bankman-Fried (SBF), filed for bankruptcy in November 2022 following its collapse. In the aftermath, the FTX bankruptcy estate, led by CEO John J. Ray III, initiated several lawsuits to recover assets for creditors and former customers.
The Lawsuit
In November 2023, FTX filed a $1 billion lawsuit against Bybit, its investment arm Mirana, and several executives. The lawsuit alleged that:
- Bybit leveraged its “VIP” status and close relationships with FTX staff to withdraw approximately $327 million in digital assets and cash just before FTX‘s collapse.
- Bybit was granted priority access to withdrawals when other users faced difficulties accessing their funds.
- Bybit was holding hostage over $125 million worth of FTX assets on its platform.
Recent Settlement
On October 24, 2024, FTX and Bybit reached a tentative settlement agreement worth $228 million. The key points of the settlement include:
- FTX will recover $175 million in digital assets currently held on Bybit’s platform.
- FTX will sell approximately $53 million worth of BIT tokens to Mirana Corp., Bybit‘s investment division.
- Defendants who withdrew funds just before FTX‘s bankruptcy will be entitled to creditor claims amounting to 75% of their total account balances as of the bankruptcy filing date.
Context and Significance
This settlement is part of FTX‘s broader efforts to recover assets and repay creditors. It comes after the approval of FTX‘s reorganization plan on October 7, 2024, which aims to reimburse 98% of users with approximately 118% of their claims in cash.
The agreement is pending court approval, with a hearing scheduled for November 20, 2024. If approved, it will mark a significant step in FTX‘s bankruptcy proceedings and asset recovery efforts. FTX‘s legal team emphasized that while they were confident in the merits of their claims, the settlement provides a more certain outcome than continuing with potentially costly and complex litigation.
