FTX, a bankrupt cryptocurrency exchange, and the United States Commodities Futures Trading Commission (CFTC) have agreed to a $12.7 billion settlement. This agreement resolves a 19-month lawsuit. The settlement follows months of negotiations and now awaits court approval, as shown in a July 12 filing.
Settlement Includes Restitution
The CFTC sued FTX, its former CEO Sam Bankman-Fried, and FTX’s sister trading firm Alameda Research in December 2022. The lawsuit claimed the firm committed fraud and made misrepresentations by marketing FTX.com as a digital commodity asset platform.
The settlement agreement includes $8.7 billion in restitution and $4 billion in disgorgement. The CFTC did not seek a civil monetary penalty. FTX acknowledged, “Given the conduct, guilty pleas, and convictions of the FTX Insiders, the Debtors face very substantial potential liability to the CFTC.” The commodities regulator is the “most significant single creditor" in Chapter 11 bankruptcy cases, FTX added.
“The Proposed Settlement is an integral and valuable component of the Debtors’ proposed chapter 11 reorganization plan,” said Commodity Futures Trading Commission senior trial attorney Carlin R. Metzger and FTX’s CEO John J. Ray III. “It resolves ongoing litigation and disputes with one of the largest creditors of the Debtors, avoids the cost and delay of further litigation, and mitigates a significant risk of diminution of the assets available for distribution to creditors.”
Settlement Hearing Scheduled August 6
A hearing on the settlement is set for August 6 in the Bankruptcy Court for the District of Delaware. FTX’s proposed reorganization plan would see a 118% return for 98% of the creditors with claims under $50,000, based on the US dollar value of asset prices at the time of FTX’s bankruptcy filing in November 2022.
Many FTX creditors have expressed a preference for a cryptocurrency payout in-kind, considering the market’s 166% increase in market cap since FTX’s bankruptcy filing. Creditors are currently voting on their preferred payout method. They have until August 16 before US Bankruptcy Court Judge John Dorsey makes a final decision on October 7.
