TLDR
- FTX has agreed to a $12.7 billion settlement with the CFTC, pending court approval.
- The settlement includes $4 billion in disgorgement and $8.7 billion in restitution.
- This settlement is part of FTX’s Chapter 11 bankruptcy proceedings and reorganization plan.
- FTX’s collapse in 2022 led to fraud charges against former CEO Sam Bankman-Fried.
- The settlement aims to repay creditors and customers affected by FTX’s bankruptcy.
Bankrupt cryptocurrency exchange FTX has agreed to a $12.7 billion settlement with the U.S. Commodity Futures Trading Commission (CFTC), marking a significant step in resolving the fallout from its collapse in 2022.
The settlement, which is still subject to court approval, includes $4 billion in disgorgement and $8.7 billion in restitution.
This agreement comes after months of negotiations and is part of FTX’s ongoing Chapter 11 bankruptcy proceedings.
The settlement aims to resolve the lawsuit filed by the CFTC in December 2022, which accused FTX, its former CEO Sam Bankman-Fried, and sister company Alameda Research of fraud and misrepresentation.
FTX’s downfall in November 2022 sent shockwaves through the cryptocurrency market, wiping out an estimated $200 billion in market value.
Investigators discovered that the company lacked sufficient funds to back up its customers’ assets, leading to a liquidity crisis and eventual bankruptcy.
The proposed settlement is a key component of FTX’s reorganization plan. According to bankruptcy court documents, it will allow for a swift resolution of the case and enable prompt distribution of funds to creditors and customers.
JUST IN: #FTX offers to settle with the CFTC for $12.7 billion.
– $4b to the CFTC and $8.7b to repay customers & lenders.#cryptocurrency #CryptoNews pic.twitter.com/m0KS1kDnuO
— Bitinning (@bitinning) July 17, 2024
The CFTC, described as the “most significant single creditor” in the bankruptcy case, did not seek an additional civil monetary penalty.
Under the current reorganization plan, FTX aims to return at least 100% of bankruptcy claims to creditors. The company has disclosed that it has amassed approximately $15 billion from liquidating Alameda Research’s venture capital investments.
This amount is expected to be sufficient to reimburse 98% of FTX creditors who hold claims of $50,000 or less at a rate of 118 cents on the dollar.
The legal repercussions of FTX’s collapse extend beyond the company itself. Sam Bankman-Fried, the co-founder and former CEO, was convicted of fraud and money laundering charges and sentenced to 25 years in prison.
He has since appealed his sentence and the order to repay $11 billion in forfeiture.
The settlement and ongoing legal proceedings highlight the increasing regulatory scrutiny in the cryptocurrency industry.
CFTC Chair Rostin Behnam has warned that the current regulatory framework remains vulnerable to similar collapses.
