The legal action involves the pursuit of “compensatory and punitive damages” from ByBit relating to the token scheme and assets held on its platform. Bankrupt company FTX, led by CEO John Jie Ray III, has filed a lawsuit against ByBit and its investment arm Mirana, along with several executives, aiming to recover the funds and digital assets withdrawn by ByBit from FTX just before its collapse, now amounting to around one billion dollars.
ByBit purportedly leveraged its “VIP access” and connections with FTX employees to withdraw significant cash and digital assets from Mirana and Time Research (another entity linked to ByBit) and FTX executives immediately before FTX’s collapse. During the withdrawal difficulties faced by FTX in November 2022, FTX employees tracked VIP clients’ withdrawal requests in a spreadsheet titled “VIP Request – Priority Allocation,” with the lawsuit alleging that FTX’s settlement team made significant efforts to prioritize large withdrawal operations for Mirana, resulting in transfers exceeding 327 million dollars to Mirana. The total value of assets withdrawn by ByBit and its executives from FTX has now reached nearly one billion dollars.
The lawsuit alleges that ByBit imposed restrictions on FTX’s ownership, preventing the withdrawal of assets exceeding 125 million dollars from the ByBit exchange. It is claimed that ByBit used these assets as leverage to recover the remaining balance of 20 million dollars that it was unable to withdraw from FTX before its collapse.
Further claims in the lawsuit include an executive from ByBit specifically disclosing to FTX in October 2021 that the company controls BitDAO, now known as Mantle, despite presenting BitDAO as a decentralized organization managed by community members. Subsequently, in May 2023, ByBit contacted the ownership of the bankrupt FTX regarding a reverse transaction, despite the value of BIT tokens, which was approximately 50 million dollars at that time, far exceeding the value of FTT tokens, around 4 million dollars at that time. After FTX rejected the “unreasonable proposal,” BitDAO swiftly rebranded its token to Mantle, offering MNT tokens to BIT holders for a 1:1 transfer. It is alleged that when FTX began the transfer, BitDAO disabled it and conducted a “community vote” to decide on restricting FTX from transferring its own tokens.
According to the lawsuit, FTX informed ByBit that the action violated the automatic stay in Chapter 11 bankruptcy. Among the defendants named in the lawsuit include Mirana Ventures, a subsidiary of Mirana led by David Toh.
However, the “community vote” was ratified, where the votes appear to be tied to ByBit executives. The legal action involves the pursuit of “compensatory and punitive damages” from ByBit relating to the token scheme and assets held on its platform.