New York judge approves $12.7 billion settlement for FTX and Alameda to pay creditors

US District Judge Peter Castel has finalized a $12.7 billion settlement, forcing bankrupt cryptocurrency exchange FTX and its sister company Alameda Research to compensate the former’s creditors.

This decision is part of an agreement with the Commodity Futures Trading Commission (CFTC) of the United States.

Judge approves $12.7 billion settlement

Judge Castel’s approval, filed Aug. 7, concludes a 20-month lawsuit initiated by the CFTC.

The filing requires FTX Trading and Alameda to jointly pay $8.7 billion in restitution to those who incurred losses and $4 billion in disgorgement of profits made from their violations.

The consent order also permanently prohibits FTX and Alameda Research from deceiving or defrauding, or attempting to defraud or defraud, intentionally deceiving or attempting to defraud customers or others.

They are also prohibited from owning or transacting in digital asset commodities and buying or selling digital asset commodities on behalf of third parties.

Details of the demand

The lawsuit, filed in December 2022, accused FTX, its former CEO Sam Bankman-Fried and Alameda Research of engaging in fraud and misrepresentation by promoting FTX.com as a digital commodity asset platform, the resulting in $8 billion in customer losses.

The CFTC originally made a $52.2 billion claim, which has now been settled at $12.7 billion. FTX and Alameda agreed to this settlement on July 12, with final approval granted by Judge Castel on August 7. The CFTC also did not seek a civil monetary penalty, ensuring that the $12.7 billion will be used to pay FTX’s creditors.

Meanwhile, FTX’s proposed reorganization plan targets a 118% return for 98% of creditors with claims under $50,000, based on asset values ​​from FTX’s November 2022 bankruptcy filing.

However, many creditors prefer a cryptocurrency payment, reflecting the growth of the market since FTX’s Chapter 11 filing. Creditors have until Aug. 16 to vote on their preferred payment method, with U.S. Bankruptcy Court Judge John Dorsey making the final decision on Oct. 7.

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