In a recent development, United States District Judge Peter Castel has finalized a $12.7 billion settlement requiring the bankrupt cryptocurrency exchange FTX and its sister company Alameda Research to compensate the creditors of FTX. This settlement is the result of a lawsuit filed by the United States Commodity Futures Trading Commission (CFTC) that lasted for 20 months.
The settlement mandates that FTX Trading and Alameda Research jointly pay $8.7 billion in restitution to those creditors who incurred losses and $4 billion in disgorgement for gains obtained through their violations. Additionally, the consent order permanently prohibits FTX and Alameda from engaging in any fraudulent or deceptive practices, as well as from owning or transacting digital asset commodities on behalf of third parties.
The lawsuit, initiated in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of promoting FTX.com as a digital commodity asset platform, leading to customer losses totaling $8 billion. Initially, the CFTC sought a $52.2 billion claim, which has now been settled at $12.7 billion. The final settlement was agreed upon by FTX and Alameda Research on July 12, with Judge Castel granting approval on August 7.
FTX’s proposed reorganization plan aims to provide a 118% return for 98% of creditors with claims under $50,000, based on asset values from FTX’s bankruptcy filing in November 2022. However, many creditors are pushing for a cryptocurrency payout due to the significant growth in the market since FTX’s Chapter 11 filing. Creditors have until August 16 to vote on their preferred payout method, and U.S. Bankruptcy Court Judge John Dorsey will make the final decision on October 7.
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