According to court documents on Wednesday, Judge P. Kevin Castel of the Southern District of New York approved a $12.7 billion settlement between FTX, Alameda Research and the Commodity Futures Trading Commission.
The shuttered cryptocurrency exchange FTX and its associated trading firm Alameda Research reached a settlement with the CFTC in July after months of negotiations, pending approval of the consent decree.
This puts an end to a lawsuit the CFTC filed in December 2022 against the exchange, former FTX CEO Sam Bankman-Fried, and Alameda, alleging that customers lost $8 billion due to fraud. The agency originally sought a $52.2 billion claim.
As part of the settlement, the CFTC agreed to take nothing from FTX as long as it complies with the reorganization plan, so FTX will pay its creditors up to $12.7 billion in full, depending on available funds. FTX said in a July court filing that the CFTC is the “single most significant creditor” in its Chapter 11 bankruptcy case.
FTX and Alameda must pay $8.7 billion in restitution to those who suffered losses as a result of their violations of the Commodity Exchange Act. An additional $4 billion in restitution must be made for profits made through the violations.
The indemnification and recovery amounts will be managed through the Company’s ongoing bankruptcy proceedings. Any funds or assets from the bankruptcy will be used to repay FTX and Alameda creditors and will be distributed as ordered by the court, overseen by John Ray, FTX Trading’s interim CEO, or the plan administrator.
In addition to settlement transactions, FTX Defendants and their affiliates are also permanently prohibited from directly or indirectly engaging in trading, trading or related activities related to “commodity interests.” This includes engaging in digital asset commodities such as Bitcoin, Ether or USDT for their own account or for any account that has a direct or indirect interest in them.
FTX and Alameda must fully cooperate with the CFTC in any related investigation or proceeding, including by providing any necessary documentation and testimony.
FTX’s collapse into bankruptcy
FTX filed for bankruptcy protection in November 2022. The debtors disclosed a reorganization plan in May, stating that they plan to provide 98% of creditors with at least 118% of their permitted claims. Under the plan, creditors with permitted claims of less than $50,000 are eligible to receive 118% compensation if the court approves.
Some, including those representing FTX’s largest creditors, oppose the plan, saying the exchange should pay in cryptocurrencies rather than dollars if it files for bankruptcy. Voting on the plan is due on August 16.
Bankman-Fried was convicted in November 2023 of seven criminal counts, including wire fraud and conspiracy to commit wire fraud, and was sentenced to nearly 25 years in prison. The U.S. Securities and Exchange Commission also charged Bankman-Fried with fraud.
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