FTX and Alameda bankruptcy advisers made allegations of fraud against crypto exchange Bybit, its two corporate affiliates, and four senior executives, in a lawsuit filed on Nov. 10. The lawsuit alleged that the defendants used a “fraudulent scheme” to withdraw cash and assets from the FTX platform, right before it collapsed.

FTX is looking to recover $953.2 million that was fraudulently withdrawn by the defendants in the 90 days preceding the bankruptcy. The lawsuit named Mirana, Bybit’s investment arm, and Time Research, a crypto trading firm affiliated with Mirana, as the two corporate defendants besides Bybit.

Under Chapter 11, FTX has the right to recover funds paid out in the 90 days before the bankruptcy filing. The law is meant to stop certain creditors from a windfall just because they managed to get their money out where others failed.

Mirana allegedly used its VIP Status to prioritize withdrawals

As per the lawsuit, Mirana was an active trader on the FTX platform with an account balance of “several hundred million dollars.” Mirana’s trading activity and its affiliation with Bybit earned it “preferential treatment” compared to the average customer, the lawsuit notes.

Mirana was assigned the “VIP” status, giving it access to FTX Group employees and concierge support. When concerns about FTX’s financial health arose, Mirana used its privileges to prioritize its withdrawal requests as individual FTX customers struggled. The lawsuit states:

“Mirana leveraged its VIP connections to pressure FTX Group employees to fulfil its withdrawal requests as soon as assets became available, further reducing the funds available to meet withdrawal requests by FTX.com’s non-VIP customers.”

As a result of the pressure from Mirana, FTX employees “repeatedly changed” Mirana’s settings in FTX’s know-your-customer (KYC) system before withdrawals were frozen, the lawsuit notes.

Bybit allegedly used its control of FTX assets as leverage

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Author: Monika Ghosh

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