FTX and CFTC Agree to $12.7 Billion Settlement After Long-Standing Lawsuit

Jimmy Aki
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Defunct cryptocurrency exchange FTX and the U.S. Commodity Futures Trading Commission (CFTC) have agreed to a $12.7 billion settlement, finally resolving a lawsuit that has lasted for 19 months.

CFTC Will Receive $12.7 Billion, Pending U.S. Court Approval

The July 12 filing shows that the $12.7 billion settlement came after extensive negotiations between FTX and CFTC, now subject to court approval. The settlement agreement includes $8.7 billion in restitution and $4 billion in disgorgement.

CFTC senior trial attorney Carlin R. Metzger and FTX CEO John J. Ray III jointly stated that “the proposed settlement is an integral and valuable component of the debtors’ proposed chapter 11 reorganization plan.”

This “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,” they added.

Notably, the CFTC did not seek a civil monetary penalty. But FTX stated that the commodities regulator is the “most significant single creditor” in the Chapter 11 bankruptcy cases.

A hearing on the settlement is scheduled for August 6 in the Bankruptcy Court for the District of Delaware.

The proposed reorganization plan would provide a 118% return for 98% of the creditors – those with claims under $50,000, which is based on the US dollar value of asset prices at the time of FTX’s bankruptcy filing in November 2022.

Recall that CoinShares sold its FTX claims in June 2024 and achieved a net recovery rate of 116%, which was £31.32 million on a £26.6 million claim following the usual closing conditions

However, many FTX creditors have decided they want to receive payouts in cryptocurrency, which would factor in the market’s 166% increase in market cap since the bankruptcy filing.

Creditors are currently voting on their preferred payout method, with the voting deadline set for August 16. US Bankruptcy Court Judge John Dorsey will make a final decision on October 7.

The Collapse of FTX and What it Means for its Executives

The CFTC sued FTX, its former CEO Sam Bankman-Fried, and FTX’s sister trading firm Alameda Research in December 2022, accusing the firm of fraud and misrepresentations by marketing FTX.com as a digital commodity asset platform.

The executives at FTX were not left out either, as they were equally charged to court, where they testified against Sam Bankman-Fried, claiming he instructed them to commit fraudulent activities.

According to testimony from former senior FTX executive Nishad Singh, Sam Bankman-Fried and other FTX executives spent $8 billion worth of customer funds on real estate, venture capital investments, campaign donations, endorsement deals, and a sports stadium.

On March 28, 2024, SBF was sentenced to 25 years imprisonment, and Ryan Salame, the head of FTX’s subsidiary in the Bahamas, was sentenced to 7 and half years in prison.

Meanwhile, other former executives of the company – Nishad Singh awaits sentence on October 30, and Gary Wang will be sentenced on November 20 in Manhattan federal court after they both pleaded guilty to fraud.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.