FTX Crypto Exchange Resolves Legal Conflict with Bybit through $228 Million Settlement

FTX has come to a resolution with Bybit through a settlement agreement valued at nearly $228 million. This move concludes the protracted legal wrangle stemming from claims of favored withdrawals prior to FTX’s insolvency.

The arrangement was submitted to the US Bankruptcy Court in Delaware last Thursday, marking a pivotal development in FTX’s quest to reclaim funds for its creditors.

FTX Poised to Regain Crypto Assets Worth $175 Million

As part of the agreement, FTX is set to recover crypto assets valued at $175 million, which are currently under Bybit’s custody.

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In addition, Bybit’s investment branch, Mirana, will purchase BIT tokens from FTX amounting to close to $53 million. This agreement brings closure to the longstanding dispute.

Despite delivering a resolution, the settlement falls considerably short of the $953 million initially demanded by FTX’s bankruptcy estate in their November 2023 lawsuit.

The terms of the settlement state that defendants who executed fund withdrawals shortly before the bankruptcy will receive creditor claims equivalent to 75% of their account balances at the time of FTX’s bankruptcy filing.

FTX has noted that this deal brings about “substantial net savings for the debtors’ estates,” and helps bypass the risks and expenses tied to extended legal battles. They elaborated in their filing,

“The Settlement Agreement ensures that the Debtors will be recouping virtually all that they sought to reclaim.”

FTX Pursued a $953 Million Reimbursement from Bybit in 2023

The conflict originated from FTX’s allegation that Bybit’s subsidiary, Mirana, enjoyed preferential treatment in the exchange’s waning days.

Initiated on November 10, 2023, the lawsuit pursued a recovery of about $953 million in assorted cash and crypto assets. FTX contended that Mirana’s VIP status facilitated a withdrawal of nearly $500 million just before FTX ceased its customer withdrawals.

Significantly, FTX accused Mirana of misusing its position to extract roughly $327 million in crypto from the platform while other clients faced withdrawal constraints.

The allegations of such favored access shaped the core of FTX’s legal challenge against Bybit, citing that these moves diminished the pool of funds accessible to other clients.

A $12.6 Billion Redistribution Blueprint Given Judicial Nod Recently

This settlement comes as a segment of CEO John J. Ray III’s orchestrated recovery scheme, who has presided over FTX’s insolvency proceedings since November 2022.

This earlier period witnessed the court sanctioning the proposal to implement the wind-down strategy, mandating a minimum distribution of $12.6 billion to customers left with inoperative crypto on the exchange.

The legal procedures enlisted the expertise of renowned firms, with Sullivan & Cromwell LLP and Landis Rath & Cobb LLP representing FTX.

This agreement heralds a significant juncture in FTX’s bankruptcy management and the ongoing campaign to salvage assets for impacted patrons.

Notwithstanding the settlement announcement, FTT’s valuation remained unaffected, with CoinMarketCap figures showing a trading price of $1.73 at the time of reporting.

Contrarily, FTT’s market value had dipped by roughly 5.5% in the preceding 24 hours, with the past week exhibiting a downturn of over 16%.