FTX settled its lawsuit against the crypto exchange Bybit for an amount of $228 million, after a year of legal battles. This deal allows FTX to recover a portion of the assets lost during the crypto crash of 2022, providing much-needed funds to pay back former customers and creditors.

From $953 Million to $228 Million

The original lawsuit, initiated in late 2023, sought to reclaim approximately $953 million from Bybit. FTX accused Bybit’s investment arm, Mirana, of receiving preferential treatment, allowing it to withdraw nearly $500 million right before FTX halted withdrawals. 

This preferential treatment allegedly reduced available funds for FTX’s other customers. The lawsuit filed on November 10, 2023, detailed how Mirana was able to withdraw approximately $327 million worth of cryptocurrency during a critical period.

The dispute escalated as FTX claimed that Bybit restricted its access to recover assets held on Bybit’s platform, effectively holding them “hostage.”

Although the final settlement amount falls short of the initial claim, it represents a win for FTX's bankruptcy estate.

In court filings, FTX emphasized that this arrangement brings “significant net savings for the debtors’ estates.” By settling, FTX avoids the uncertainties and costs associated with prolonged litigation. 

“Through the Settlement Agreement, the Debtors will be recovering substantially everything that they seek to recover,” the filing read. 

Implications of the Settlement

The settlement allows FTX’s liquidation estate to reclaim $175 million in cryptocurrencies from Bybit accounts. As part of the agreement, FTX plans to sell over 105 million BIT tokens held by Mirana, valued at around $52.7 million. 

Additionally, customers who withdrew funds from FTX before its bankruptcy will still be eligible to claim 75% of their aggregate balance as of the petition date.

FTX’s bankruptcy expert, John J. Ray III, noted that over 94% of creditors have voted in favor of the company’s reorganization plan. The District of Delaware Bankruptcy Court approved this plan, which aims to repay 98% of creditors at least 118% of their claim value in cash. This plan aims to help FTX wind up its affairs while returning funds to customers after Genesis Global Capital, a major lender, filed for bankruptcy in January.

Legal Complexities

In parallel court proceedings, FTX’s legal team highlighted that this settlement paves the way for the confirmation of Genesis’s chapter 11 reorganization plan. 

FTX’s original claims against Genesis amounted to $3.88 billion, covering loan repayments made by its hedge fund arm, Alameda Research, and assets withdrawn by Genesis from FTX before its collapse.

Bybit's settlement with FTX also serves as a strategic move for the company, which can focus on recovery while coping with legal uncertainties. In a statement regarding the settlement, Ray remarked that the deal was fair and in FTX’s best interests, given the ongoing legal challenges.