FTX and US CFTC Reach $12.7 Billion Settlement: Details
CFTC did not pursue a civil monetary penalty, allowing the full $12.7 billion to be allocated for repaying FTX’s creditors.
Bankrupt cryptocurrency exchange FTX and the U.S. Commodity Futures Trading Commission (CFTC) have reached a $12.7 billion settlement, pending approval from a Delaware judge.
If approved, the entire $12.7 billion will be allocated to paying back FTX’s creditors, as the CFTC has decided against seeking a civil monetary penalty.
$12.7 Billion Settlement
The settlement, detailed in a July 12 filing , comes after extensive negotiations between the bankrupt exchange and the U.S. commodities regulator.
“The Proposed Settlement is an integral and valuable component of the Debtors’ proposed chapter 11 reorganization plan,” stated CFTC senior trial attorney Carlin R. Metzger and FTX’s CEO John J. Ray III.
“It 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.”
The lawsuit, filed by the CFTC in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and its sister trading firm Alameda Research of fraud and misrepresentations. The CFTC claimed these actions caused customers to lose $8 billion and initially sought a $52.2 billion claim, which has now been settled at $12.7 billion.
The settlement allocates $8.7 billion for restitution and $4 billion for disgorgement. The $4 billion in disgorgement will be subordinate to the payment of all creditor claims, ensuring their priority.
Additionally, the filing states that the CFTC will receive nothing if FTX complies with its reorganization plan, allowing up to $12.7 billion to be distributed to creditors, subject to available funds.
CFTC Forgoes Penalty in FTX Settlement
The CFTC has also chosen not to pursue a civil monetary penalty. Instead, the entire $12.7 billion will be allocated to repaying FTX’s creditors.
“In this bespoke settlement, the CFTC foregoes its own recovery against FTX in order to supplement the recoveries of customers and cryptocurrency lenders beyond the levels typical in chapter 11 cases,” explained Andy Dietderich, partner at Sullivan Cromwell and lead counsel for the FTX Debtors.
A hearing on the settlement is scheduled for August 6 in the Bankruptcy Court for the District of Delaware. FTX’s proposed reorganization plan aims for a 118% return for 98% of creditors with claims under $50,000, based on the asset prices at the time of FTX’s bankruptcy filing in November 2022.
However, some creditors have opposed this plan, arguing that payouts should reflect the current value of cryptocurrencies, which have increased by 166% since the bankruptcy filing. Creditors are voting on their preferred payout method, and on October 7, U.S. Bankruptcy Court Judge John Dorsey will make the final decision.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Bitcoin and Ethereum ETF Entry Series Ended! Major Exits! Here is the Latest Data…
Long-term inflows in spot Bitcoin and Ethereum ETFs have given way to outflows.
EU Commission approves Nvidia’s Run:ai acquisition
Share link:In this post: This followed a probe over competition concerns raised by Italian regulators. The EU Commission unconditionally approved the transaction. The Nvidia case is one of the many other probes into big tech firms’ acquisition of smaller companies.
SEC hits Jump Trading with $123m fine over TerraUSD scandal and Luna misconduct
Share link:In this post: SEC has fined Jump Trading $123 million over its role in the TerraUSD scandal. Tai Mo Shan agreed to settle the fine without admitting or refuting the charges. Jump Trading made more than $1 billion in profit in an arrangement with Terraform.
Shiba Inu advances DeFi strategy with Chainlink partnership
Chainlink's CCT standard allows Shiba Inu tokens to achieve interoperability and expand across 12 blockchains.