Defunct crypto exchange FTX and associated trading firm Alameda Research have agreed to pay $12.7 billion to creditors, following the approval of a consent order by New York judge P. Kevin Castel on Wednesday.
The settlement agreement concludes a 20-month-long lawsuit brought by the Commodity Futures Trading Commission (CFTC). FTX, former CEO Sam Bankman-Fried, and Alameda were accused in December 2022 of fraud resulting in customer losses of $8 billion.
The deal requires FTX and Alameda to pay $8.7 billion in restitution to customers affected by their violations of the Commodity Exchange Act. Additionally, $4 billion in disgorgement is mandated for gains obtained through these violations.
These amounts will be managed through FTX and Alameda’s ongoing bankruptcy proceedings, with funds or assets used to repay creditors, overseen by the interim CEO of FTX Trading, John Ray, or a plan administrator.
Interestingly, the CFTC has agreed to receive nothing from the settlement as long as FTX complies with its reorganization plan. This arrangement means that FTX will allocate the up to $12.7 billion settlement entirely to its creditors, with the CFTC recognized as the largest single creditor in FTX’s Chapter 11 bankruptcy cases.
– Advertisement –
Furthermore, the settlement imposes a permanent prohibition on the FTX defendants and associated parties from engaging in trading or transactions involving commodity interests and related activities. This includes trading digital asset commodities like bitcoin, ether, or USDT for their own accounts or any accounts where they have a direct or indirect interest.
FTX and Alameda are required to fully cooperate with the CFTC in any related investigations or proceedings, providing necessary documents and testimony.
FTX filed for bankruptcy protection in November 2022. The debtors revealed a reorganization plan in May 2023, proposing to give 98% of its creditors at least 118% of allowed claims.
Creditors with claims below $50,000 would be eligible for this 118% compensation upon court approval. However, some creditors have opposed this plan, arguing for payouts in cryptocurrencies rather than their dollar value at the time of the bankruptcy filing. Votes on the plan are due by August 16.
Sam Bankman-Fried, former CEO of FTX, was found guilty in November 2023 of seven criminal counts, including wire fraud and conspiracy to commit wire fraud, resulting in a nearly 25-year prison sentence. The U.S. Securities and Exchange Commission has also charged him with fraud.
