FTX And Bybit Settle for $228M in Bankruptcy Lawsuit

The bankruptcy estate of the cryptocurrency exchange FTX has reached an agreement with Bybit, another crypto trading platform, to settle a lawsuit filed last year seeking to recover funds for creditors.

According to a document filed in the United States Bankruptcy Court for the District of Delaware, FTX will receive $228 million rather than the $953 million the bankruptcy estate initially sought via the lawsuit in November 2023.

The Legal Dispute Between FTX And Bybit

As part of FTX’s efforts to recoup funds from third parties, the exchange’s bankruptcy estate sued Bybit roughly a year ago, demanding $953 million in cash and cryptocurrencies. FTX claimed that Bybit withdrew the funds shortly before it filed for bankruptcy in November 2022.

FTX alleged that Bybit, its corporate affiliates, and its investment arm, Mirana Group, were able to make the withdrawals by leveraging special benefits other customers did not have. According to the complaint, Bybit and Mirana persuaded FTX’s former employees to process their withdrawals faster than other customers when rumors of the company’s liquidity issues began to make the rounds.

As a result, Bybit withdrew its assets on FTX before the exchange became insolvent and crashed. Between November 7 and 8, Bybit withdrew $327 million, nearly a third of the $953 million sought by FTX, before FTX halted withdrawals. FTX discovered this by examining the movement of funds via a database.

Settling For $228M

After months of negotiations with Bybit, the FTX bankruptcy estate has decided to settle with the crypto exchange and resolve disputes between the entities without delay and the cost of further litigation. 

Bybit will allow FTX to withdraw roughly $175 million in cryptocurrencies held in six accounts on its exchange, and Mirana will buy FTX’s 105 million BIT tokens for $0.50 each, amounting to approximately $53 million. BIT is the native token of BitDAO, a decentralized autonomous organization run by Bybit. This settlement is still subject to a court’s approval.

“Through the Settlement Agreement, the Debtors will be recovering substantially everything that they seek to recover with respect to their turnover claims and claims for violations of the automatic stay, as well as meaningful reductions to the Transfer Defendants’ customer claims against the Debtors,” the filing stated.

Meanwhile, the court officially approved FTX’s bankruptcy reorganization plan earlier this month.