The CEO John J. Ray III, leading the FTX bankruptcy estate, has initiated a legal action against ByBit, its investment arm Mirana, and several executives in an attempt to recover funds and digital assets that were withdrawn from FTX just before its collapse, currently valued at nearly $1 billion.
The lawsuit alleges that ByBit used its privileged access and connections with FTX staff to withdraw substantial cash and digital assets from Mirana, Time Research (another entity associated with ByBit), and executives right before FTX’s collapse.
Amidst FTX’s withdrawal issues in November 2022, FTX employees monitored VIP customers’ withdrawal requests in a spreadsheet titled “VIP Request – Prioritize (Settlement).” The lawsuit claims that FTX’s settlement team worked diligently to prioritize Mirana’s large withdrawals, resulting in over $327 million in transfers to Mirana. The total value of assets withdrawn by ByBit and its executives from FTX has now reportedly reached almost $1 billion.
The lawsuit alleges that ByBit has imposed restrictions on the FTX estate, preventing the withdrawal of assets exceeding $125 million on the ByBit exchange. It is claimed that ByBit is using these assets to leverage the recovery of a remaining balance of $20 million that it was unable to withdraw from FTX before its collapse.
In October 2021, a ByBit executive reportedly privately disclosed to FTX that the company controlled BitDAO, now known as Mantle, despite presenting BitDAO as a decentralized organization run by community members. Then, in May 2023, ByBit approached the FTX bankruptcy estate about reversing the transaction, even though the value of the BIT tokens, approximately $50 million at the time, far exceeded the value of the FTT tokens, approximately $4 million at the time.
After FTX rejected the “illogical proposal,” BitDAO swiftly rebranded as Mantle, introducing MNT tokens for BIT holders to convert at a 1:1 ratio. As FTX began its conversion, BitDAO allegedly disabled it and held a “community vote” to decide on restricting FTX from converting its tokens.
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According to the lawsuit, FTX notified ByBit that the action violated the automatic stay in Chapter 11 bankruptcy. Nevertheless, the “community vote” passed, with votes seemingly linked to ByBit executives. Notably, the fifth-largest vote came from the wallet “dtoh.eth,” identified as Mirana Ventures, a Mirana subsidiary led by David Toh.
The legal action is seeking “compensatory and punitive damages” from ByBit regarding the token scheme and the assets held on its platform.
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