FTX and Bybit Reach $228M Settlement, Dropping Lawsuit to Aid Creditor Repayment

In a critical move to further its strategy for repaying creditors,  ex-crypto exchange FTX has agreed to allow the lawsuit against Bybit die as part of a $228 million-dollar settlement. Announced via a bankruptcy court filing last Thursday, the FTX and Bybit settlement case will allow FTX to reclaim much of the assets that were previously locked in Bybit’s platform. The FTX creditors will be hopeful over this development as it should bode well for their compensations when the liquidation of the firm pushes further.

FTX and Bybit’s Legal Battle Ends in Settlement

The lawsuit, filed in November last year, reportedly alleged that Bybit used its VIP status with FTX to siphon off large amounts of money shortly before the 2022 collapse. The lawsuit has seen FTX accuse not only Bybit but also its senior management along with its investment arm, Mirana of moving hundreds of millions in assets, alleging that Bybit held these funds “hostage” by blocking the FTX’s estate access to those.

Following marathon negotiations, an agreement was officially reached between the two and a global settlement satisfied all sides, giving FTX back the money crucial for creditor repayments.

Recovery Breakdown: Crypto Assets and BIT Tokens

Under the terms of the settlement, $175 million in cryptocurrencies held within Bybit accounts can be returned to FTX’s liquidation estate. Also, Bybit’s investment branch, Mirana, will return to FTX over 105 million BIT tokens (equivalent to roughly $52.7M).

In particular, the settlement provides that account holders who removed money before FTX’s bankruptcy can receive 75% of their entire account balance as listed at the petition date. FTX welcomed the return of these assets as an important milestone and stated that it intended to use recovered funds to settle potential losses incurred by its affected creditors.

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This asset recovery plan is consistent with FTX’s overall strategy of resolving claims and assembling assets to restructure. According to FTX, “Through the Settlement Agreement, the debtors will be recovering substantially everything that they seek to recover,” meaning that this settlement eclipses considerably beyond a simple importance of their scope.

FTX’s Bankruptcy Restructuring Gains Approval

An expert specializing in bankruptcies, John J. Ray III led FTX to win resounding creditor support for their reorganization plan. Last month, FTX said that 94% of the creditors voted for the plan designed to return operational solvency back to the exchange. Based on this agreement, the District of Delaware Bankruptcy Court approved the reorganization plan that had presented a way for at least 98% of creditors to be paid in cash with no less than 118% claim value being returned.

The approval paves the way for what now appears to be a long road ahead that seeks redemption in repaying creditors and wrestling back some credibility within the crypto world on its latest iteration as FTX.

Conclusion: A Path Forward for FTX and Bybit

The $228 million settlement is part of FTX’s recent undertakings to address unpaid claims and reimburse creditors, including new features such as a backdated transaction recovery tool it announced last month. The settlement of the forfeiture positions will support FTX in improving its reorganization and plan for more efficient returns of available assets to creditors.

This is a significant step for FTX in their ongoing process to make good on its legal and financial obligations after shuttering the platform in 2022.

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