FTX has reached a settlement agreement with Bybit worth approximately $228 million. This puts an end to the long-running legal battle over allegations of preferential withdrawals prior to FTX's bankruptcy.
The proposed settlement was filed Thursday in U.S. Bankruptcy Court for the District of Delaware. The decision also marks one of the latest steps in FTX's efforts to recover assets for affected customers.
FTX now able to recover $175 million worth of cryptocurrencies
The agreement consists of two main elements. One is the recovery of $175 million worth of cryptocurrencies currently held on Bybit's exchange.
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The second is the nearly $53 million sale of BIT tokens to Mirana, Bybit's investment arm. This settlement brings an end to a long-running dispute.
However, it still falls short of the $953 million that FTX's bankruptcy estate originally sought in its November 2023 lawsuit.
Under the terms of the settlement, defendants who withdrew funds immediately before bankruptcy will receive creditor claims equal to 75% of their account balances as of the date of FTX's bankruptcy filing.
FTX stressed in its filing that the arrangement will result in “significant net savings to the debtor's estate.” The exchange also said this would avoid the uncertainty and costs associated with protracted litigation. FTX stated in its filing:
“Through the settlement agreement, the debtor will recover substantially everything it seeks to recover.”
FTX seeks $953 million from Bybit in 2023
The dispute began with FTX's claims that Bybit's investment arm, Mirana, received preferential treatment on the exchange's final day.
The first lawsuit was filed by the exchange on November 10, 2023, seeking recovery of approximately $953 million in cash and virtual currency. FTX claimed that Milana's VIP status allowed it to withdraw nearly $500 million just before it stopped withdrawals.
Specifically, FTX said Milana used special privileges to withdraw approximately $327 million worth of cryptocurrencies from the platform while other account holders struggled to access their funds. he claimed.
This preferential treatment was at the heart of the claim against Bybit. FTX also claimed that these actions reduced funds available to other customers.
Judge early approves $12.6 billion distribution plan
The settlement is part of a resolution strategy led by CEO John J. Ray III. He has overseen FTX's bankruptcy process since taking over the FTX exchange in November 2022.
Earlier this month, the company received court approval to implement a wind-down plan. According to the plan, the exchange will distribute at least $12.6 billion to customers whose cryptocurrencies are locked up on its platform.
Several prominent law firms are involved in this case. FTX was represented by Sullivan & Cromwell LLP and Landis Rath & Cobb LLP.
This agreement marks a major milestone in FTX's bankruptcy proceedings and ongoing efforts to recover the assets of affected customers.
However, the news of the settlement has not had a positive impact on FTT prices. At the time of writing, FTT was trading at $1.73, according to data from CoinMarketCap.
In contrast to the positive settlement, the coin has fallen over 5.5% in the past 24 hours. If we look at the price performance over the past 7 days, we also see that the price has fallen by over 16%.
