Lawsuit Alleges Bybit Fintech Exploited VIP Privileges in FTX’s Collapse

In a recent development, FTX’s bankruptcy advisers have taken legal action against cryptocurrency exchange Bybit Fintech and its affiliated companies, filing a lawsuit in a Delaware court seeking the recovery of approximately $953 million in cash and digital assets. The lawsuit alleges that Bybit’s investment arm, Mirana Corp., enjoyed exclusive “VIP” benefits not accessible to most FTX customers.

According to the complaint, Mirana took advantage of these privileges to withdraw a substantial portion of its assets from Sam Bankman-Fried’s FTX exchange just before its Chapter 11 filing a year ago in November 2022. The lawsuit contends that Mirana pressured FTX employees to expedite its withdrawal requests, leaving regular FTX customers waiting for hours as the exchange faced imminent collapse.

The legal action aims to recover assets, including over $327 million allegedly withdrawn by Mirana from FTX between the early morning of November 7 and November 8, 2022, when FTX temporarily paused withdrawals. Bybit Fintech Ltd., Mirana, and affiliated crypto trading firm Time Research Ltd. are named as defendants in the bankruptcy lawsuit.

The lawsuit also identifies a senior Mirana executive and Singaporean residents allegedly involved in or benefiting from the FTX withdrawals, now subject to bankruptcy proceedings. Chapter 11 bankruptcy typically provides failed companies with an opportunity to recover funds in the months preceding the filing, preventing certain creditors from unfairly benefiting due to early withdrawals.

FTX stated in the lawsuit that it assessed the value of assets withdrawn by Bybit and its affiliates using November 1 pricing, with the possibility of adjusting pricing information as the litigation progresses. The complaint acknowledges that some legal claims may be subject to “subsequent new value” defenses. This legal battle sheds light on the complex dynamics surrounding cryptocurrency exchanges and the challenges faced during financial distress.

Source: cryptonews

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