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FTX has resolved its dispute with Bybit, its officers, and its subsidiary Mirana, with an amount which will return about $228 million to the now-defunct exchange. This resolution is stated to assist the crypto exchange in the settlement of its debtors within the next few months.
“Over the past months, the parties have engaged in lengthy, good faith negotiations regarding these claims and ultimately reached a global settlement reflected in the Settlement Agreement,” said in the bankruptcy court filing.
As part of this agreement, FTX’s liquidation estate will recover $175 million worth of cryptocurrency stranded in Bybit accounts, and the crypto exchange will further receive from Mirana more than 105 million tokens of BIT valued at around $52.7 million.
In addition, defendants who withdrew from the crypto exchange prior to its chapter 11 can expect to recover 75% of their account balance at the petition date.
Reasons Behind FTX Lawsuit Against Bybit and Mirana
The crypto exchange claimed in their November 2023 filing of a $1 billion case against Bybit and Mirana that the latter two abused their “VIP” privileges by interacting closely with the executives of FTX to siphon roughly $327 billion worth of assets in cryptocurrency and cash on the brink of the crypto exchange collapse.
Representing the crypto exchange in its bankruptcy, attorneys claimed that with the aid of a database, Mirana and a number of other investors were given special rights to withdraw funds first during the time when the crypto exchange platform was just starting to go down.
The case against Bybit forms a series of several cases that were a challenge for the law firm and the FTX estate during the entire period of the attempt to reorganize the company.
FTX stakeholders resolved to settle their case against Sullivan & Cromwell on October 7, when Judge John Dorsey sanctioned the FTX reorganization plan. This particular firm catered for FTX in a number of deals when the exchange was operational.
Some of the FTX investors maintained that the law firm was aware of the fraudulent activities of the FTX and still actively rendered services to the company, allegedly making abusive gains through the fraudulent activities.
FTX Investors Put a Hold on its Lawsuit Against Sullivan & Cromwell
The crypto exchange investors have suspended their case against Sullivan & Cromwell, which was meant to hold them liable for their advisories prior to the fall of FTX. They claim that the inadequate guidance this firm provided was one of the considerable downfalls during the operation period of FTX that led to its downfall in the year 2022.
The suit claims that the firm undertook support for the crypto exchange operations but failed to implement necessary factors such as regulatory compliance, and the investors seek to recover the amounts they lost when FTX collapsed from the firm.
How FTX and Founder Sam Bankman-Fried Misused Users’ Funds
In November 2022, the crypto exchange filed for bankruptcy amid serious allegations of fraud, financial mismanagement, and engaging in a number of high-risk activities. The crypto exchange was once a booming cryptocurrency exchange only to find itself abusing and misusing customer accounts and funds in secrecy.
Its founder, Sam Bankman-Fried, also owned a firm known as Alameda Research, which had deep ties with the crypto exchange. The crypto firm had, in effect, been secretly siphoning off customer deposits into Alameda to finance its reckless speculation and persistent losses.
When these problems became apparent, the crypto exchange customers attempted to withdraw their cash, but this was not sufficient because the company lacked the necessary liquidity. The crypto exchange was placed in a situation where it had a liquidity deficit and was required to declare bankruptcy.
The deal FTX reached with Bybit and Mirana is a positive development in FTX’s attempts to repay its creditors. Ever since $228 million has been set aside for the bankrupt exchange, the crypto exchange intends to make appreciable headway on settling debts over the next few months.
The fact that such a long time period was required to reach the said solution reflects joint efforts to meet the claims brought about by the failure of the crypto exchange. Even if investors are currently not pursuing their claims against Sullivan & Cromwell, the advisory issues which have always been at the back of FTX’s activities and the issues which contributed to its failure still persist.
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