In a dramatic legal battle, FTX’s bankruptcy estate, led by CEO John J. Ray III, has filed an extensive lawsuit against ByBit, its investment arm Mirana, and top executives. The core of the lawsuit centers around the alleged withdrawal of substantial funds and digital assets totaling nearly $1 billion shortly before FTX’s collapse.
The lawsuit alleges that ByBit took advantage of its “VIP” privileges and close ties to FTX employees to withdraw substantial amounts of cash and digital assets from companies such as Mirana and Time Research, which are associated with ByBit. It’s alleged that during FTX’s tumultuous withdrawal period in November 2022, a spreadsheet labeled “VIP Request – Prioritize (Settlement)” tracked VIP customers’ withdrawal requests. The lawsuit alleges that FTX’s settlement team went to great lengths to expedite Mirana withdrawals, resulting in a total of more than $327 million being transferred to the company. Allegedly, the total assets withdrawn by ByBit and its executives now amount to approximately $1 billion.
The complaint also alleges that ByBit imposed restrictions on FTX’s assets by limiting withdrawals of assets on the ByBit exchange to $125 million. Allegedly, ByBit is using these assets as leverage to make up for a $20 million balance that it was unable to withdraw prior to FTX’s collapse.
In addition, the lawsuit alleges that ByBit originally controlled BitDAO, known as Mantle, although it was represented as a decentralized entity. Subsequently, ByBit approached FTX’s bankruptcy estate to unwind the transaction, but FTX refused. This refusal was allegedly the catalyst for the renaming of BitDAO to Mantle and a controversial vote that seemingly precluded FTX’s token conversion, which FTX disputed, citing bankruptcy law.
The lawsuit seeks substantial compensatory and punitive damages from ByBit for alleged irregularities in the token system and asset management on the platform.