FTX and US CFTC Reach $12.7B Settlement: Details

Bankrupt cryptocurrency exchange FTX and the US Commodity Futures Trading Commission (CFTC) have reached a $12.7 billion settlement, pending approval by a Delaware judge.

If approved, the entire $12.7 billion will go toward paying FTX’s creditors, as the CFTC has decided not to seek a civil monetary penalty.

$12.7 billion settlement

The deal, 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 plan of reorganization,” said CFTC Senior Counsel Carlin R. Metzger and FTX CEO John J. Ray III.

“It resolves ongoing litigation and disputes with one of the debtors’ largest creditors, avoids the cost and delay of further litigation, and mitigates a significant risk of diminishing 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 trading sister company Alameda Research of fraud and misrepresentations. The CFTC claimed that 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 agreement allocates $8.7 billion for restitution and $4 billion for dumping. The $4 billion outlay will be subordinated to the payment of all creditor claims, ensuring their priority.

The filing also states that the CFTC will receive nothing if FTX follows through on its reorganization plan, allowing up to $12.7 billion to be distributed to creditors, subject to available funds.

CFTC waives penalty in FTX settlement

The CFTC has also chosen not to pursue a civil monetary penalty. Instead, the entire $12.7 billion will go toward paying FTX’s creditors.

“In this tailored settlement, the CFTC is waiving its own recovery against FTX in order to supplement recoveries from cryptocurrency customers and lenders beyond the levels typical of Chapter 11 cases,” explained Andy Dietderich, partner at Sullivan & Cromwell and senior adviser to the FTX. Debtors.

A hearing on the settlement is scheduled for Aug. 6 in Bankruptcy Court for the District of Delaware. FTX’s proposed reorganization plan targets a 118% return for 98% of creditors with claims under $50,000, based on asset prices at the time of FTX’s bankruptcy filing in November 2022.

However, some creditors have opposed that plan, arguing that payments should reflect the current value of the cryptocurrencies, which have risen 166% since the bankruptcy filing. Creditors are voting on their preferred payment method, and on Oct. 7, U.S. Bankruptcy Court Judge John Dorsey will make the final decision.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!