The recent $12.7 billion settlement finalized by United States District Judge Peter Castel has put bankrupt cryptocurrency exchange FTX and its sister company Alameda Research in the spotlight. This decision comes as part of a settlement with the United States Commodity Futures Trading Commission (CFTC) after a 20-month-long lawsuit initiated by the commission. The filing mandates that FTX Trading and Alameda jointly pay $8.7 billion in restitution to those who incurred losses and $4 billion in disgorgement for gains obtained through their violations.
In addition to the financial compensation, the consent order issued by Judge Castel also includes strict terms for FTX and Alameda Research. They are permanently banned from cheating, defrauding, willfully deceiving, or attempting to deceive customers or other persons. Moreover, they are prohibited from owning or transacting digital asset commodities and from buying or selling digital asset commodities on behalf of third parties.
The lawsuit, which was initiated in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of fraud and misrepresentation. They were found to have promoted FTX.com as a digital commodity asset platform, resulting in customer losses amounting to $8 billion. Initially, the CFTC pursued a $52.2 billion claim, which was eventually settled at $12.7 billion. FTX and Alameda agreed to this settlement on July 12, with the final approval granted by Judge Castel on August 7.
While FTX’s proposed reorganization plan aims for a 118% return for 98% of creditors with claims under $50,000, many creditors are leaning towards a cryptocurrency payout. This preference reflects the growth of the market since FTX’s Chapter 11 filing. Creditors have until August 16 to vote on their preferred payout method, with U.S. Bankruptcy Court Judge John Dorsey making the final decision on October 7. The CFTC’s decision not to seek a civil monetary penalty ensures that the entire $12.7 billion will be utilized to repay FTX creditors.
The $12.7 billion settlement between FTX, Alameda Research, and the CFTC marks a significant milestone in the cryptocurrency world. While the financial compensation is substantial, the long-term implications of the strict terms outlined in the consent order will undoubtedly shape the future behavior of entities operating in the digital asset space.