In a dramatic development following the collapse of the FTX exchange on November 11, 2022, founder Sam Bankman-Fried faced up to 110 years in prison following his swift conviction on seven charges. The federal lawsuit, notable for its effectiveness, revealed the extent of FTX’s $8 billion fraud and left hundreds of thousands of victims waiting for potential compensation. Here are the latest developments in the FTX ecosystem…
1 year has passed since the FTX scandal
While bankruptcy expert John J. Ray III, known for his work in the Enron case, is leading current efforts to recover FTX users’ funds, the timeline and scope of asset recovery remains unclear. The FTX saga reveals significant gaps in the ability of U.S. financial regulators to keep up with the rapidly evolving crypto industry. Despite the expectation of crypto regulation in 2023, Congress has yet to pass any significant legislation. In response, the SEC and CFTC have intensified enforcement against major exchanges such as Coinbase, Kraken and Binance.
Rumors about the potential relaunch of FTX have been swirling, with discussions involving creditors converting their assets into a stake on the reconstituted exchange. However, the decision is still undecided and internal debates continue over the source of the necessary capital.
Lawsuit against Bybit
FTX’s bankruptcy estate filed a lawsuit against ByBit, its investment arm Mirana, and various executives, demanding the recovery of approximately $1 billion in funds and digital assets that were allegedly withdrawn just before FTX’s collapse. The lawsuit alleges that ByBit used its “VIP” access and ties to FTX staff to prioritize significant withdrawals and obstruct FTX’s recovery efforts.
According to the lawsuit, FTX notified ByBit that the action violated the automatic stay in the Chapter 11 bankruptcy. Despite this, the “community vote” passed, with votes appearing to be linked to ByBit executives. Notably, the fifth largest vote came from the “dtoh.eth” wallet, identified as Mirana Ventures, a Mirana subsidiary run by David Toh.
New stock market studies
Additionally, former FTX executives, including former lawyer Can Sun, are spearheading the establishment of a new cryptocurrency exchange in Dubai called Backpack Exchange. Focused on securing customer funds, the startup uses a self-custodial solution that integrates multiparty computing (MPC) to ensure fund safety. Sun, Ferrante, and Zhang draw on lessons learned at FTX to highlight trust and transparency in the post-FTX crypto landscape.
Currently in beta, Backpack Exchange is gearing up for a wider launch later this month, offering an alternative following the collapse of FTX. As regulatory uncertainties continue, the crypto industry grapples with the need for robust frameworks and increased transparency to regain trust.