A New York judge has officially greenlit a $12.7 billion settlement between bankrupt crypto exchange FTX, its sister trading firm Alameda Research, and the US Commodity Futures Trading Commission (CFTC). The funds will be directed towards reimbursing FTX creditors, marking a significant step in the aftermath of the high-profile crypto collapse.
The settlement, which was initially agreed upon in July, resolves a 20-month legal battle initiated by the CFTC. The regulator accused FTX of fraud and misrepresentation, alleging that the platform misled investors by falsely portraying itself as a secure digital asset platform.
Crucially, the CFTC did not seek monetary penalties in this case. This means the entire $12.7 billion will be dedicated to compensating FTX creditors. The settlement mandates that FTX and Alameda return $8.7 billion to defrauded investors and disgorge an additional $4 billion in illicit profits.
Beyond financial restitution, the order imposes stringent restrictions on FTX and Alameda. The companies are permanently barred from engaging in fraudulent activities, dealing in digital asset commodities, and acting as intermediaries in digital asset commodity transactions.
The CFTC’s role in this case has been pivotal. As the “most significant single creditor” in FTX’s bankruptcy proceedings, the regulator has played a crucial role in safeguarding the interests of defrauded investors.
Also Read: FTX Estate Battles $264 Million Claim: Was Undelivered 800 Million SRM Loan a Sham?
While this settlement represents a significant win for FTX creditors, the road to full recovery is still ongoing. A proposed reorganization plan promises to return 118% of their claims to 98% of creditors with claims under $50,000. However, many creditors prefer to receive cryptocurrency payouts instead of cash, given the substantial appreciation of the crypto market since FTX’s collapse.
The final decision on the payout method will be made by US Bankruptcy Court Judge John Dorsey in October. Until then, creditors have until August 16 to submit their preferences.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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