In a significant development in the FTX bankruptcy case, the cryptocurrency exchange reached a $228 million settlement with Bybit, detailed in an Oct. 24 court filing. The settlement emerges from a lawsuit initiated by FTX in 2023 to recover funds for its creditors and former customers. It stipulates that FTX will recover $175 million in digital assets from Bybit and sell $53 million in BIT tokens to Mirana Corp, Bybit’s investment division.
The strategy behind the settlement aims to help FTX resolve claims efficiently, bypassing the prolonged and expensive process of litigation. FTX attorneys emphasized the necessity of this approach, noting that continued legal battles would be both time-consuming and costly. A court hearing to finalize this settlement is slated for Nov. 20 at 2 PM Eastern Time.
Origins of the Settlement
The origins of this settlement trace back to a $1 billion lawsuit filed by FTX against Bybit and Mirana Corp in November 2023. The lawsuit accused these entities of leveraging their connections with FTX executives to secure “VIP” access. This preferential status allegedly allowed them to withdraw approximately $327 million in digital assets and cash just before FTX’s collapse, safeguarding their assets over other customers.
The FTX bankruptcy estate has concentrated efforts on reclaiming what it deems preferential or fraudulent transfers. The internal database of FTX monitored these disputed accesses, which have been a primary focus of the case. The eventual approval of the settlement on Nov. 20 is crucial as it would allow FTX to progress with asset distribution to creditors, thus advancing the estate closer to meeting its repayment obligations.
Broader Proceedings
The settlement with Bybit is part of the broader FTX bankruptcy proceedings. On Oct. 7, Judge John Dorsey approved FTX’s reorganization plan—a pivotal step towards addressing FTX’s obligations to its creditors. This reorganization plan lays the groundwork for the structured repayments to creditors.
Moreover, a lawsuit involving FTX creditors against Sullivan & Cromwell, a legal firm that represented FTX in numerous transactions before its collapse, was recently dismissed. The creditors had accused Sullivan & Cromwell of continuing to provide legal services to FTX despite potential irregularities, profiting financially from these engagements. Following the approval of the reorganization plan, the creditors opted to voluntarily drop their lawsuit against the firm.
Conclusion
The settlement involving Bybit is part of the ongoing FTX bankruptcy proceedings. On October 7, Judge John Dorsey approved FTX’s reorganization plan, a crucial milestone aimed at addressing FTX’s obligations to its creditors. This plan is designed to facilitate a structured approach to repaying those creditors.
Additionally, a lawsuit brought by FTX creditors against the law firm Sullivan & Cromwell was recently dismissed. Sullivan & Cromwell had represented FTX in various transactions before its collapse, and the creditors accused the firm of continuing to provide legal services to FTX despite noticing potential irregularities and profiting financially as a result. However, after Judge Dorsey signed off on the reorganization plan, the creditors decided to voluntarily drop their lawsuit against Sullivan & Cromwell. This dismissal marks an important step in the larger effort to resolve the FTX bankruptcy and ensure that creditors are systematically repaid. The resolution of these legal issues is crucial for moving forward with the reorganization and repayment plans.
