Judge Peter Castel has officially approved a $12.7 billion settlement between the bankrupt cryptocurrency exchange FTX and its sister company Alameda Research. This settlement comes as a result of a lawsuit filed by the United States Commodity Futures Trading Commission (CFTC) that lasted for 20 months. The ruling requires FTX Trading and Alameda to jointly pay $8.7 billion in restitution to those who suffered losses and $4 billion in disgorgement for gains made through their violations.
In addition to the financial obligations, the consent order issued by Judge Castel also includes a permanent ban on FTX and Alameda Research from engaging in cheating, defrauding, willfully deceiving customers or other parties. They are also prohibited from owning or participating in transactions involving digital asset commodities, as well as buying or selling digital asset commodities on behalf of third parties. This ban is a significant consequence of the lawsuit initiated in December 2022.
The lawsuit accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of fraudulent activities and misrepresentations related to their promotion of FTX.com as a digital commodity asset platform. The misleading information led to customer losses amounting to $8 billion. Initially, the CFTC pursued a $52.2 billion claim, which has now been settled at $12.7 billion after negotiations between the parties involved.
FTX and Alameda Research agreed to the settlement terms on July 12, with the final approval granted by Judge Castel on August 7. It is notable that the CFTC did not pursue a civil monetary penalty in addition to the $12.7 billion settlement, ensuring that the entire amount will be utilized to repay FTX creditors.
As part of FTX’s proposed reorganization plan, creditors with claims under $50,000 are projected to receive a 118% return based on asset values from FTX’s bankruptcy filing. While this may seem favorable, many creditors are expressing a preference for a cryptocurrency payout due to the significant growth in the market since FTX’s bankruptcy filing in November 2022. Creditors have until August 16 to vote on their preferred repayment method, with the final decision to be made by U.S. Bankruptcy Court Judge John Dorsey on October 7.
Overall, the settlement of this lawsuit marks a significant step towards resolving the legal challenges faced by FTX and Alameda Research. The financial obligations and bans imposed by the court serve as a reminder of the consequences of engaging in fraudulent activities within the cryptocurrency industry.
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