The FTX bankruptcy estate has reached a $228 million settlement with cryptocurrency exchange Bybit to recover funds for repaying former FTX customers and creditors.
Under the terms of the settlement, FTX will retrieve $175 million in digital assets held by Bybit, along with an additional $53 million in BIT tokens, which will be sold to Mirana Corp, Bybit’s investment arm.
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FTX Lawyers Warn Prolonged Litigation Could Prove Costly
FTX attorneys expressed that while they believe the claims in the lawsuit hold merit, prolonged litigation could prove costly and time-consuming, with uncertain outcomes.
“Plaintiffs’ claims for turnover, violations of the automatic stay, and fraudulent and preferential transfers are disputed, carry some degree of risk, and in any event would be time-consuming and expensive to further litigate,” stated the legal filing.
The settlement still requires court approval, with a hearing scheduled for November 20, 2024, at 2 PM ET to finalize the agreement.
FTX’s $225 Million Settlement with Bybit: A Bad Deal for Creditors
The $225 million settlement between FTX debtors and Bybit, while touted as a success, indeed raises some tough questions. Breaking down the actual components and context, there are several reasons why this deal… pic.twitter.com/IXTI9YvJfQ— FTX Historian (@historian_ftx) October 28, 2024
FTX originally launched a $1 billion lawsuit against Bybit and Mirana in late 2023, alleging that these entities used special privileges and “VIP” access to preemptively withdraw $327 million in digital assets and cash in the days leading up to FTX’s downfall.
Attorneys for FTX’s estate argued that Bybit and Mirana received priority withdrawal access from FTX executives, potentially influencing the estate’s financial losses during its collapse.
The settlement with Bybit is one among several legal battles for FTX’s estate, as the exchange’s bankruptcy team continues efforts to recover funds for creditors.
The approval of FTX’s reorganization plan earlier in October by Judge John Dorsey provided a boost to these recovery efforts, allowing the exchange to streamline creditor payments.
Additionally, FTX investors recently dismissed their lawsuit against Sullivan & Cromwell, the law firm that represented the cryptocurrency exchange, after accusing it of complicity in the exchange’s alleged fraudulent activities.
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FTX to Begin Repayments By End of 2024
The FTX bankruptcy estate has set a goal to begin customer repayments by the end of 2024.
The process, being managed through two parallel bankruptcy proceedings, includes a Chapter 11 case. It is being overseen by a Delaware court in the US and the official liquidation of FTX Digital, its subsidiary based in the Bahamas.
Meanwhile, both entities have pledged to cooperate. This will ensure that creditors can submit claims to either process without risking a reduction in their entitled recovery.
The first interim distribution to creditors is anticipated by the end of 2024, pending the completion of necessary KYC documentation.
More recently, Caroline Ellison, former CEO of Alameda Research, has been sentenced to two years in a minimum-security prison. Ellison’s sentencing follows a plea deal. In it, she admitted to charges including wire fraud and money laundering.
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