US Judge Approves $12.7 Billion FTX Settlement
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On August 7, 2024, United States District Judge Peter Castel gave final approval to a landmark settlement totaling $12.7 billion. The agreement resolves claims between FTX, its affiliated company Alameda, and the Commodity Futures Trading Commission (CFTC).
Breakdown of the Settlement Between FTX, Alameda, and CFTC
The two companies will pay $12.7 billion in settlement fees, as $8.7 billion will be returned to investors defrauded by FTX founder Sam Bankman Fried, while the remaining $4 billion will be disgorgement fees.
Meanwhile, the CFTC decided not to seek a civil monetary penalty, which means all funds will directly benefit the creditors, ending a 20-month-long lawsuit from the Commission.
In addition to the settlement fee, FTX and Alameda Research received permanent bans, which means they can’t cheat or defraud commodity customers or engage in digital asset commodities transactions. They are also barred from buying or selling digital asset commodities on behalf of third parties.
🚨 BREAKING: FTX CREDITORS TO RECEIVE $12.7 BILLION💰
In a significant development, a New York judge has approved a $12.7 billion settlement between the defunct crypto exchange FTX, its sister firm Alameda Research, and the U.S. Commodity Futures Trading Commission (CFTC). This… pic.twitter.com/ioxBNhiA3n
— ⚡️ Noel Hatem (@noelhatem) August 8, 2024
The CFTC filed a lawsuit against FTX and Alameda Research in December 2022, claiming that the firm committed financial fraud and an act of misrepresentation, acting as a virtual commodity asset platform when, in reality, it was not.
Following the lawsuit, negotiations set in, which went on for months before FTX and Alameda settled with the CFTC on July 12, although it was pending final approval.
FTX Plans Repayment for Creditors
FTX, in what it calls its plan of reorganization, has come up with a way to ensure that creditors receive fair compensation to prevent further legal battles in the future.
According to the reorganization plan, 98% of FTX’s creditors will receive no less than 118% of their allowed claims in cash within 60 days of implementation. Other creditors will also receive full settlements on their claims and an extra payment to account for the time value of their investments.
FTX expects the total value of property collected, converted to cash and available for distribution to be between $14.5 billion and $16.3 billion. If approved by the bankruptcy court, 98% of FTX's creditors will receive approximately 118% of their allowed claims within 60 days of…
— Wu Blockchain (@WuBlockchain) May 7, 2024
Recall that CoinShares completed sales of its FTX claims in June, achieving a net recovery rate of 116%.
However, creditors are still debating whether to receive their payouts in cash or cryptocurrency, especially after the 150% rise in the crypto market since FTX’s bankruptcy.
The final decision on the preferred payment method will be made following a voting period ending on August 16, with U.S. Bankruptcy Court Judge John Dorsey set to make a final determination on October 7.
Meanwhile, Bloomberg analysts have commended FTX on its resolve to pay back creditors.
According to them, FTX has amassed billions of dollars more than it needs to cover what customers lost in its November 2022 collapse. This sets them up to receive full recoveries, plus interest, a rare outcome in US bankruptcy proceedings and a positive look for the crypto market.
