FTX Sues Bybit to Claw Back $953M in 'Misappropriated Funds'

The FTX estate says the funds were "preferentially" or "fraudulently" transferred to Bybit and affiliates in the lead up to its November 2022, bankruptcy filing.

AccessTimeIconNov 13, 2023 at 4:48 p.m. UTC
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The estate of bankrupt crypto firm FTX has sued exchange platform Bybit to try and recover a total of $953 million transferred to the latter's investment arm, court filings from Friday show.

Efforts so far to claw back what it says were "misappropriated funds" have included suing former FTX executives and even the parents of founder Sam Bankman-Fried.

Friday's legal complaint filed in Delaware targets Bybit Fintech Ltd., its investment arm Mirana and several individuals, including Mirana executive Sean Tan. It alleges the investment unit "received gross transfers from FTX.com of digital assets currently valued at approximately $838 million," of which about $500 million were transferred in the days before FTX halted withdrawals on Nov. 8, 2022.

The suit also alleges an additional $115 million in digital and fiat assets were transferred to entities and individuals affiliated with Bybit and Mirana.

"As with Mirana, the majority of these assets – more than $61 million – were withdrawn in the final days before FTX.com and FTX US disabled withdrawals," the complaint said.

The FTX estate claims Bybit was given VIP status on the exchange, and that, in the days leading up to the bankruptcy filing, Mirana and affiliates "raced to withdraw assets" from their FTX accounts.

"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," the complaint said, adding that FTX employees also repeatedly changed Mirana’s Know-Your-Customer (KYC) settings in the days prior to the withdrawals pause.

The suit seeks the return of assets "preferentially" or "fraudulently" transferred to Bybit and affiliates that are now allegedly "held hostage" by the latter.

FTX's former management has been accused of misappropriating customer funds by the estate's new management and the U.S. government. Bankman-Fried was recently found guilty of fraud against FTX customers by a New York jury and faces jail time when sentenced next year.

CoinDesk has reached out to Bybit for comment.

Edited by Sheldon Reback.


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Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.


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