US Court Orders FTX To Pay $12.7 Billion In CFTC’s Major Cryptocurrency Case
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A US court has ordered FTX, the bankrupt cryptocurrency exchange, to give $12.7 billion in relief to its customers. The Commodity Futures Trading Commission (CFTC) shared the decision earlier this week.
The decision followed FTX’s breakdown in late 2022, which trapped many customers’ deposits and led to concerns about how the exchange managed money. The CFTC revealed that FTX presented itself as a safe platform for cryptocurrency trading. However, the regulator said the exchange allegedly spent customer funds on its risky investments.
CFTC Accuses FTX Of Misrepresenting Itself As A Secure Crypto Trading Platform
Rostin Behnam, the Commodity Futures Trading Commission Chairman, stated that FTX brought in customers by pretending to be reliable. The regulator accused the firm of betraying its customers’ trust by using their deposited funds for high-risk investments.
The court’s repayment order is part of a broader agreement between the CFTC and FTX. According to this deal, FTX has promised to follow a bankruptcy plan to fully repay customers. The repayment will be based on the value of accounts at the time of the company’s bankruptcy filing.
The settlement also clears a hurdle for customers trying to get their money back. It ensures that the government’s lawsuit won’t reduce the amount of funds available for repayment.
According to the agreement, FTX must pay $8.7 billion to make up for losses and another $4 billion to give back wrongfully gained money. This money will be used to compensate victims of the exchange’s collapse. Importantly, the Commodity Futures Trading Commission agreed to wait on collecting these payments until all customer claims, including interest, are fully paid.
FTX founder and ex-Chief Executive Officer Sam Bankman-Fried was sentenced to 25 years in prison in March for stealing $8 billion from customers, a decision he is now appealing. FTX, from its bankruptcy, has been trying to resolve disagreements with US regulators and previous business partners.
FTX Aims To Sell Off Assets To Raise Money For Customer Refunds
The Commodity Futures Trading Commission reported that FTX has been selling off assets like property and investments made with stolen funds to increase the money available for customer refunds. Currently, FTX is asking customers to vote on a bankruptcy plan, and this has caused some debate.
Some customers are not pleased with the plan since it sets repayments based on the lower cryptocurrency prices from November 2022. Customers have until 16 August 2024 to vote on the proposal, and FTX wants final approval to close down.
FTX’s bankruptcy estate plans to begin returning money to customers by the end of 2024. This initiative is being managed through two side-by-side bankruptcy cases, including a Chapter 11 case. A court in Delaware is overseeing this, along with the official closing of FTX Digital, its Bahamas-based subsidiary.
