FTX has reached a settlement agreement with Bybit worth approximately $228 million. This has put an end to the prolonged legal battle over alleged preferential withdrawals before FTX’s collapse.
The settlement was filed with the US Bankruptcy Court for the District of Delaware on Thursday. This decision is also one of the latest steps in FTX’s efforts to recover assets for affected customers.
FTX Can Now Recover $175 Million Worth of Crypto
The agreement comprises two major components. One is the recovery of $175 million worth of crypto currently held on Bybit’s exchange.
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The second one is the sale of BIT tokens to Bybit’s investment arm, Mirana, for nearly $53 million. This settlement now gives a resolution to the prolonged dispute.
However, it still falls short of the $953 million initially sought by FTX’s bankruptcy estate in their November 2023 lawsuit.
Under the terms of the settlement, defendants who withdrew funds just before the bankruptcy will receive creditor claims equal to 75% of their account balances as of FTX’s bankruptcy filing date.
FTX emphasized in the filing that this arrangement generates “significant net savings for the debtors’ estates.” The exchange also mentioned that this avoids the uncertainties and costs associated with prolonged litigation. FTX stated in the filing,
“Through the Settlement Agreement, the Debtors will be recovering substantially everything that they seek to recover.”
FTX Sought $953 Million from Bybit in 2023
The dispute began with FTX’s allegations that Bybit’s investment arm, Mirana, received preferential treatment during the exchange’s final days.
The initial lawsuit was filed on November 10, 2023, by the exchange and sought to recover approximately $953 million in cash and crypto. FTX claimed that Mirana’s VIP status allowed it to withdraw nearly $500 million just before it halted withdrawals.
Specifically, FTX alleged that Mirana leveraged special privileges to withdraw approximately $327 million worth of crypto from the platform while other account holders struggled to access their funds.
This preferential treatment was central to the claims against Bybit. FTX also argued that these actions reduced available funds for other customers.
Judge Approved $12.6 Billion Distribution Plan Earlier
This settlement is part of a resolution strategy led by CEO John J. Ray III. He has overseen FTX’s bankruptcy proceedings since taking over the exchange in November 2022.
Earlier this month, the company received court approval to execute a wind-down plan. According to the plan, the exchange will distribute at least $12.6 billion to customers whose crypto has been trapped on the platform.
The legal proceedings involve several prominent law firms. FTX was represented by Sullivan & Cromwell LLP and Landis Rath & Cobb LLP.
The agreement represents a major milestone in FTX’s bankruptcy proceedings and ongoing efforts to recover assets for affected customers.
However, the news of the settlement hasn’t affected the price of FTT in a positive way. According to CoinMarketCap data, FTT was trading at $1.73 at press time.
Contrary to the positive settlement, the coin was down by over 5.5% in the last 24 hours. A look at the price performance over the last seven days also shows that the price was down by over 16%.
