FTX Sues ByBit For The Recovery Of Almost $1B, Raising Fraud Allegations

The bankrupt crypto exchange, FTX, is still recovering most of its misappropriated funds. Recently, FTX filed a lawsuit against crypto exchange ByBit, demanding a payback of nearly $1 billion in crypto assets.

Notably, through its new executives, the now-bankrupt exchange has recovered about $7 billion worth of assets following its implosion in late 2022. The recovered funds will be used to repay affected customers.

FTX Demands Recovery Of Funds From ByBIT And Its Affiliates

As part of its fund recovery efforts, the FTX bankruptcy estates filed a lawsuit on November 10. The suit is against the prominent crypto exchange ByBit, its venture subsidiary Mirana, another company called Time Research, and other company executives.

In the suit filed with the United States Bankruptcy Court of Delaware, FTX's estate demanded a payback of $953 million in digital assets from ByBit.

It claims that ByBit leveraged its VIP connection to withdraw crypto assets from the FTX platform a few days before the suspension of withdrawals on November 8, 2022.

According to the filings, ByBit allegedly forced FTX Group staff to prioritize withdrawals for the exchange. The employees reportedly tampered with Mirana's KYC setting on FTX to set the firm among the front row on the withdrawal list.

The complaint stated:

Mirana leveraged its VIP connections to pressure FTX Group employees to fulfill its withdrawal requests as soon as assets became available, further reducing the funds available to meet withdrawal requests by FTX.com's non-VIP customers.

According to the court filing, Mirana first received about $838 million worth of assets as transfers from FTX.com. Of this amount, $500 million was moved before FTX stopped withdrawals in November last year. Individuals and entities related to ByBit and Mirana also received $115 million worth of assets and fiats.

ByBit Withholds FTX's Funds And Controls BitDAO Deal Against FTX

Further, the lawsuit mentioned that ByBit has been withholding some funds from FTX. The exchange barred FTX's bankrupt estate from accessing over $125 million in digital assets on its platform.

According to the complaint, ByBit demanded a refund of $20 million from the bankrupt estate before releasing the remaining funds in its custody. This was an amount that Mirana had on FTX before the latter halted withdrawals in late 2022.

The lawsuit alleged that such a denial from ByBit violates staying laws, demanding that the exchange transfer the funds to FTX. Also, FTX stated that it represents unlawful efforts from both ByBit and Mirana to set themselves ahead of other FTX's creditors.

Moreover, FTX alleged that ByBit influenced BitDAO, a decentralized autonomous organization (DAO) that it promotes. It claimed that ByBit manipulated the DAO to devalue several digital assets worth millions of dollars in FTX's holding.

Additionally, FTX stated that ByBit orchestrated a proposal that stopped the bankruptcy estate from changing its BIT coins to MNT following the rebranding of BitDAO to Mantle.

The suit demands the return of all funds from ByBit and its affiliates to FTX.

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