FTX and CFTC Settle $12.7 Billion Following Court Approval
Bankrupt cryptocurrency exchange FTX and U.S. commodities regulators have reached a $12.7 billion settlement, ending 19 months of litigation.
The agreement followed months of negotiations and now only requires court approval, according to a recently released July 12 filing.
“The proposed settlement is an essential and valuable component of the Debtors’ proposed Chapter 11 reorganization plan,” said CFTC Chief Litigation Counsel Carlin R. Metzger and FTX CEO John J. Ray III.
“This resolves ongoing litigation and disputes with one of the debtor’s largest creditors, avoids the cost and delay of further litigation, and significantly mitigates the risk of a reduction in assets available for distribution to creditors.”
In December 2022, the CFTC sued FTX, former CEO Sam Bankman-Fried, and FTX’s sister trading firm Alameda Research, alleging that the companies committed fraud and made false statements by marketing FTX.com as a digital commodity asset platform.
The settlement agreement included $8.7 billion in restitution and $4 billion in restitution.
The CFTC did not seek a civil monetary penalty, and FTX stated:
“Given the actions, pleas, and convictions of the FTX Insiders, the Debtors face very significant potential liability to the CFTC.”
FTX added that the commodity regulator is the “most significant single creditor” in the Chapter 11 bankruptcy case.
A hearing on the settlement is scheduled for August 6 in the U.S. Bankruptcy Court for the District of Delaware.
Related: Recent FTX bankruptcy puts small creditors at risk
Under FTX’s proposed reorganization plan, 98% of creditors (those with claims of less than $50,000) are expected to receive a return of 118% based on the USD value of the asset price at the time of FTX’s bankruptcy filing in November 2022.
However, many FTX creditors have expressed a preference to receive payment in cryptocurrency in kind, given that FTX’s market cap has increased by 166% since it filed for bankruptcy.
Creditors are currently voting on how to pay out the debt. They have until August 16 before U.S. Bankruptcy Court Judge John Dorsey issues a final ruling on October 7.
magazine: Deposit Risk: How Do Cryptocurrency Exchanges Actually Handle Your Money?
