Sokipiriye Dokubo
FTX, a bankrupt cryptocurrency exchange, and the Commodity Futures Trading Commission (CFTC) in the United States have agreed on a $12.7 billion settlement. This resolution comes after a 19-month lawsuit and is awaiting court approval following a filing on July 12.
Summary of Settlement
The settlement consists of $8.7 billion for restitution and $4 billion for disgorgement. Notably, the CFTC did not pursue a civil monetary penalty, ensuring that the entire $12.7 billion would go towards repaying FTX’s creditors.
Carlin R. Metzger, senior trial attorney at the Commodity Futures Trading Commission, and FTX’s CEO John J. Ray III emphasized the significance of this agreement. They described it as a crucial part of FTX’s proposed Chapter 11 reorganization plan, resolving ongoing disputes with a major creditor, avoiding additional legal costs, delays, and safeguarding creditor assets.
Background of the Legal Dispute
In December 2022, the CFTC filed a lawsuit against FTX, its former CEO Sam Bankman-Fried, and Alameda Research, FTX’s sister trading firm. The lawsuit alleged fraudulent activities and misrepresentations in promoting FTX.com as a digital commodity asset platform.
FTX recognized the substantial liability resulting from its insiders’ actions and cooperated with the CFTC, the primary creditor in the Chapter 11 bankruptcy proceedings, to reach this settlement.
Upcoming Hearings and Reorganization Strategy
A hearing on the settlement is set for August 6 at the Bankruptcy Court for the District of Delaware. FTX’s reorganization plan aims to offer a 118% return to 98% of creditors, particularly those with claims below $50,000, based on asset valuations at the time of FTX’s bankruptcy filing in November 2022.
Many creditors prefer receiving payments in cryptocurrency, reflecting the market’s 166% growth since FTX’s bankruptcy filing. Creditors are currently voting on their preferred payment method, with voting concluding on August 16. A final decision by US Bankruptcy Court Judge John Dorsey is anticipated on October 7.
This settlement is a significant stride towards concluding FTX’s bankruptcy proceedings and ensuring creditor reimbursement.