FTX has agreed to a settlement of 228 million dollars in the lawsuit with Bybit to recover funds to be allocated to creditors. The agreement now awaits court ratification to close one of the lawsuits opened by the failed exchange.
Let’s see all the details in this article.
The $228 million agreement with Bybit marks a step forward in the case for the reimbursement of former FTX clients
As anticipated, after months of negotiations and legal disputes, FTX has finally reached a settlement agreement with the exchange Bybit, securing compensation of 228 million dollars.
The agreement was presented to the bankruptcy court on October 24 and represents a significant step for the exchange. It aims to recover funds to compensate its former clients and creditors, damaged by the platform’s failure in 2022.
In detail, the agreement provides that FTX receives 175 million dollars in digital assets currently held on Bybit and another 53 million through the sale of BIT tokens to Mirana Corp, an investment arm of Bybit.
The lawyers of FTX emphasized that, although the plaintiffs’ claims are supported by evidence, the cost and complexity of the disputes make an out-of-court settlement advantageous.
The legal procedures would not only require a long time, but would also involve significant expenses, without the certainty of a positive outcome.
The agreement, however, is not yet final and will need to be ratified by a judge to come into effect. The hearing for the approval of the settlement is scheduled for November 20, 2024.
Only with the court’s consent will the agreement have legal value, and FTX will be able to proceed with the recovery of the funds, essential to support the creditors’ compensation process.
The context of the lawsuit and the bankruptcy of FTX
The lawsuit against Bybit did not arise from a simple compensation claim, but from a series of accusations made by the bankruptcy estate of FTX.
Specifically, it stated that Bybit and its division Mirana had exploited a privileged relationship with certain executives of FTX.
In particular, it is argued that the two entities used a priority access to withdraw funds ahead of other clients, withdrawing approximately 327 million dollars between digital assets and cash, just before the final collapse of FTX.
According to the representatives of FTX, these operations, tracked in a company database, were initiated following special concessions from the FTX team. Thus raising the accusation of prelievi preferenziali.
The prosecution highlighted that the actions of Bybit and Mirana worsened the liquidity crisis that was leading the exchange to bankruptcy, diverting funds that could have been allocated to the compensation of all creditors.
In any case, this was not the only lawsuit filed by the bankruptcy estate of FTX. The latter, in fact, has been involved for two years in numerous legal proceedings to attempt to recover funds intended for creditors.
In addition to the lawsuit against Bybit, FTX has indeed recently withdrawn a legal action against the law firm Sullivan & Cromwell, representing FTX in operations prior to the collapse.
According to some creditors, the law firm was aware of irregularities and potentially involved in the fraudulent behaviors that led to the bankruptcy of FTX.
A step towards the end of the compensation process
In any case, the agreement with Bybit marks an important phase in the compensation and reorganization process of the exchange.
On October 7th, Judge John Dorsey approved the reorganization plan of FTX, allowing creditors to proceed with the recovery process.
For many clients and former employees, the settlement represents a concrete hope of receiving at least a part of the lost funds.
However, the overall financial situation of FTX is still complex. Despite efforts to liquidate assets and reach agreements with counterparties, the value of the recovered assets might not be sufficient to fully cover the accumulated debts.
Furthermore, the current market conditions and the price volatility of digital assets add further uncertainty, making it difficult to predict the real value of the recovered assets.
