A new lawsuit filed by entities overseeing the FTX bankruptcy process seeks to recover $935 million that was reportedly transferred to Bybit’s investment arm and others just before the former’s Chapter 11 filing in November 2022. Bybit is also accused of using FTX assets held on its platform as leverage in its attempt to force the transfer of approximately $20 million.
Debtors Insist Transfers to Mirana Corp Intended to Defraud FTX Creditors
A 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 the larger chunk of the $935 million that was transferred just before the Chapter 11 filing. The lawsuit asserts the transfers to the investment arm were “made with the intent to hinder, delay or defraud FTX.com’s present or future creditors.”
According to FTX’s bankruptcy managers, the multiple transfers to Mirana Corp, Time Research, and certain individuals “should be avoided as fraudulent pursuant to Section 548(a)(1)(A) of the Bankruptcy Code.” Such fraudulent transfers provide FTX with the legal basis to seek the return of “the full amount of such transfers plus interest for the benefit of the debtors’ bankruptcy estates.”
As stated in the lawsuit, Mirana Corp is said to have received assets worth $837,815,847 while Time Research got $47,995,279. The lawsuit added that the collapsed crypto exchange’s claim against both Mirana and Time Research “may be subject, in part, to a ‘subsequent new value.’” However, such a new value will be dependent on the value of deposits into the two entities’ FTX.com accounts after the preferential transfers.
Holding FTX Assets Hostage
Meanwhile, in addition to laying the fraudulent preferential treatment charges against Bybit’s investment arm, the lawsuit also accuses the crypto exchange platform of refusing to honor transfer requests made on behalf of FTX debtors. Instead, Bybit is said to have demanded the release of approximately $20 million which Mirana Corp could not extract before FTX disabled withdrawals on Nov. 8, 2022.
As per the lawsuit, bankruptcy managers assert that FTX through entities it controls has assets worth $125 million held at Bybit. While there is no dispute over FTX’s ownership of the funds, the lawsuit said Bybit is continuing “to hold these assets hostage” with the hope that this will force the former to “circumvent the bankruptcy process.”
Therefore, to ensure that the funds are transferred to the debtors’ estate, FTX bankruptcy managers said they will “seek judicial enforcement of their rights under the Bankruptcy Code.”
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