Key Takeaways
- The anticipated payout for creditor claims against FTX reached an average of 37 cents on the dollar.
- The bankruptcy estate is also pursuing a multi-billion claim against Binance and a multi-million claim against K5.
- The bankruptcy estate’s decision to hold onto FTX’ share in AI startup Anthropic could prove beneficial.
- FTX accused Bybit’s VIP arm of grabbing a huge amount before bankruptcy.
In the annals of U.S. financial turmoil, FTX’s bankruptcy has earned a reputation as one of the most convoluted, with legal fees in the case nearing the $300 million mark. Anticipated payouts for FTX creditors have surged more than threefold this year, highlighting the estate’s significant success in recovering billions of dollars in assets.
As Bankman-Fried prepares to face his sentencing, work is still ongoing in claiming back the billions of dollars investors lost in the collapse of the exchange.
FTX Lawsuit Alleges Bybit’s VIP Status Abuse
The new lawsuit , filed by the entities managing FTX’s bankruptcy process, accuses Mirana Corp, an investment arm of the crypto platform Bybit, of using its “VIP” status to receive a significant portion of the $935 million that was transferred just before the Chapter 11 filing.
Before facing bankruptcy, FTX stood among the world’s largest crypto exchanges, catering to major traders like Alameda, led by Sam Bankman-Fried’s former girlfriend, Caroline Ellison. Another active trader on FTX was Mirana, the investment arm of Bybit, the sixth-largest cryptocurrency spot exchange globally.
The lawsuit reveals that Mirana, with an account balance of around $850 million on FTX in November 2022, enjoyed special privileges, such as concierge support and increased access to employees, due to its preferred status. While Mirana did not access other customers’ funds, it received VIP treatment.
In the midst of concerns about former SBF’s exchange solvency, Mirana, along with its entities and senior employees, hurriedly withdrew assets from its FTX accounts, prioritized by Bybit. This process diminished funds available to other customers, and FTX alleges that Bybit used its hold on its assets to force prioritized withdrawals.
Mirana managed to withdraw nearly $500 million of its digital assets from the disgraced exchange just before withdrawals were disabled. The bankruptcy estate claims that Bybit has refused to allow FTX to reclaim the remaining $125 million held in Bybit accounts. Bybit also allegedly devalued FTX’s cryptocurrency tokens through an entity called BitDAO.
The lawsuit details a token swap agreement between Bybit and Alameda in October 2021, leading to a dispute in May 2023 when Bybit sought to reverse the trade. FTX refused, resulting in BitDAO’s decision to rebrand and change token structures, restricting FTX’s ability to redeem its BitDAO tokens.
FTX’s bankruptcy estate aims to recover assets valued at $953 million from Bybit as of November 1, 2023.
Crypto.com Among Potential Suitors For FTX Europe
In the turbulent aftermath of FTX’s collapse, the bankruptcy estate has set its sights on FTX Europe, launching a substantial $320 million lawsuit against the subsidiary’s executives in July this year. Spearheaded by John Ray III, the debtor’s estate was fervently pursuing the recovery of funds for the failed crypto exchange, making FTX Europe the latest target in a litany of entities that received capital from FTX, ranging from politicians to hedge funds.
Contrary to the claims, FTX Europe played a pivotal role in providing one of the exchange’s core services—perpetual futures trading—to the European market. The platform continued to attract tens of thousands of users even as the FTX empire crumbled. Intriguingly, potential buyers, including Crypto.com, expressed interest in acquiring FTX Europe.
FTX Creditor Hopes Rise With Growing Estate Recoveries
In general, the amount of anticipated reimbursements for FTX creditors has more than tripled this year in over-the-counter markets where investors trade bankruptcy claims, indicating the estate’s success in recovering billions of dollars’ worth of assets.
The anticipated payout for creditor claims against former SBF’s exchange has increased to an average of 37 cents on the dollar, its highest since the bankruptcy filing in late 2022, and up from just over 10 cents at the beginning of 2023, according to data gathered by Matrixport .
According to Matrixport, there may be more clawbacks that could increase creditor payments. These include a $2.1 billion claim against the former competitor cryptocurrency exchange Binance and a further $700 million claim from investment firm K5, which is connected to Michael Kives, a former Bill and Hillary Clinton advisor.
In addition, the business has a highly sought-after $500 million share in the artificial intelligence (AI) startup Anthropic, which was purchased by the exchange using funds from customers, giving its creditors a claim. After considering selling the interest, the exchange made the decision to put the deal on hold in June.
Amazon Could Boost Creditor Claims
Given that digital giant Amazon has stated it intends to spend up to $4 billion in the business previously, this could prove to be a wise choice. According to Matrixport, Amazon’s investment “may raise the value of FTX creditor claims.”
Finally, a possible revival of the exchange—often dubbed FTX 2.0—may be encouraging to creditors.
The bankruptcy process has taken a dramatic turn with the filing of a new lawsuit alleging fraudulent transfers and asset hostage-taking. The lawsuit against Bybit, a major crypto exchange, highlights the complex web of financial transactions and potential misconduct that led to the exchange’s collapse. While the bankruptcy estate is making progress in recovering assets, the road to full restitution for FTX creditors remains long and uncertain.
