FTX has recently settled a $228 million dispute with the crypto exchange Bybit and its affiliates, putting an end to a lawsuit that was filed in November 2023. The lawsuit was seeking to recover around $1 billion in assets. This settlement allows FTX to withdraw $175 million in digital assets from Bybit’s platform and sell about $53 million in BIT tokens to Mirana Corp, Bybit’s investment arm.
This settlement comes at a time when FTX is going through bankruptcy proceedings that started in November 2022. FTX had accused Bybit and related entities of taking advantage of their close relationships with FTX executives to withdraw $327 million in assets and cash right before FTX’s collapse. These actions were considered preferential and fraudulent transfers that could be recovered under bankruptcy law.
The terms of the settlement state that defendants who withdrew funds before the bankruptcy will be able to hold creditor claims equal to 75% of their account balances as of the filing date. This arrangement is expected to save FTX’s estate a significant amount by reducing potential claims from the defendants. The settlement is subject to court approval, with a hearing scheduled for November 20, 2024.
By settling the dispute, FTX gains immediate access to substantial assets, which will help in distributing funds to creditors more efficiently. The legal team at FTX acknowledged the risks and costs associated with prolonged litigation, and they believed that settling provided certainty and accelerated asset recovery.
This settlement is part of FTX’s larger plan to repay creditors and wind down operations smoothly. In October 2024, FTX received court approval for its reorganization plan, which aims to distribute over $12.6 billion to customers who have trapped digital assets on the platform. The settlement with Bybit significantly contributes to this goal by adding value to the pool of assets available for distribution.
The lawsuit against Bybit was a strategic move by FTX to reclaim assets after filing for Chapter 11 bankruptcy. By settling the dispute, FTX avoids the complexities and expenses of a lengthy legal battle. The reorganization plan outlines how recovered assets will be distributed to customers and creditors to maximize recoveries.
FTX CEO John J. Ray III negotiated several settlements as part of the bankruptcy strategy, showing the effectiveness of negotiated resolutions in moving the bankruptcy process forward. The court hearing to approve the settlement will be crucial in FTX’s bankruptcy case, as it will pave the way for the distribution of recovered assets to creditors, marking significant progress in resolving outstanding claims and concluding the bankruptcy proceedings.