Bankrupt crypto exchange FTX is suing fellow crypto exchange Bybit, its investment arm Mirana and multiple affiliates and executives for $953 million, a Friday court filing shows.
FTX alleges that Mirana and its affiliates “preferentially and/or fraudulently transferred” hundreds of millions in assets from FTX to Bybit shortly before the exchange’s November 2022 collapse and bankruptcy filing. Bybit has been holding the assets “hostage” ever since, FTX alleges.
FTX claims Mirana received preferential treatment because of its affiliation with Bybit “relative to the average customer,” allowing it to pull its funds prior to FTX’s collapse, while other customers struggled to get their funds.
“As the backlog of pending customer withdrawal requests grew, many customers waited hours or days for withdrawals to be completed, and many more withdrawal requests remained unfulfilled as of the Petition Date,” FTX alleged, according to court documents. “But Mirana had advantages over the average customer, and used every such advantage in furtherance of a fraudulent scheme to have its withdrawal requests prioritized over those of other customers.
“Among other things, Mirana leveraged its VIP connections to pressure FTX Group employees to fulfill its withdrawal requests as soon as assets became available, further reducing the funds available to meet withdrawal requests by FTX.com’s non-VIP customers,” FTX asserted.
In response to pressure from Mirana, FTX Group employees repeatedly changed Mirana’s settings in FTX.com’s know-your-customer system, the lawsuit claims.
FTX is trying to get its hands on what it called “misappropriated funds” amid FTX bankruptcy proceedings, during which the firm has been clawing back funds to repay its creditors.
Bybit did not respond to a request for comment.
Meanwhile, two former FTX and Alameda Research executives are launching a new crypto exchange in Dubai, The Wall Street Journal reported Saturday.
FTX’s former general counsel Can Sun and former Alameda Research software developer Armani Ferrante recently obtained a license from Dubai’s Virtual Assets Regulatory Authority for their project Trek Labs, which will launch under the moniker Backpack Exchange.
“It's time to put an end to the days of opaque crypto exchanges representing everything our industry stands against,” Ferrante said Oct. 31 in a prepared statement in what was likely a veiled reference to his previous employer. “It shouldn't be normal to use an exchange with a single point of failure, without proof of reserves, or without auditability. A verifiable, unforgeable ledger is the exact problem blockchains solve, and Backpack Exchange is taking full advantage of that.
“[B]ackpack Exchange hopes to raise the bar for transparency and compliance to demonstrate the best this technology has to offer. Don't trust, verify," Ferrante said.
His business partner Sun recently spoke on behalf of the U.S. government against FTX founder and former CEO Sam Bankman-Fried last month, testifying that Bankman-Fried asked him to come up with “legal justifications" for why billions of dollars in customer funds were missing from the exchange just days before its bankruptcy filing.
Bankman-Fried was found guilty on seven counts of fraud and conspiracy. His sentencing is slated for March.