US judge approves $12.7b settlement between FTX, Alameda and CFTC

Bankrupt cryptocurrency exchange FTX and its sister firm Alameda Research will pay nearly $13 billion to creditors, ending a months-long lawsuit filed by the CFTC.

Bankrupt cryptocurrency exchange FTX and trading firm Alameda Research will pay $12.7 billion to creditors under a settlement they reached with the U.S. Commodity Futures Trading Commission, U.S. District Judge Peter Castel ruled on Aug. 7.

As part of the settlement, the court banned FTX and Alameda from offering crypto trading services or acting as intermediaries in the market. However, the order does not impose civil monetary penalties, suggesting that the full amount will be allocated to compensate creditors directly affected by FTX’s collapse.

The settlement that FTX and the CFTC previously agreed upon aims to resolve ongoing litigation and avoid the costs and delays associated with further litigation, as outlined in a court document filed on July 12.

CFTC drops $52.2 billion fine against FTX

The CFTC’s initial complaint, filed in late 2022, accused FTX, founder Sam Bankman-Fried, and Alameda of engaging in fraudulent activity that led to $8 billion in customer losses. The complaint detailed allegations that Bankman-Fried instructed FTX executives to devise a scheme that allowed Alameda Research to use the cryptocurrency exchange as a line of credit.

The CFTC initially sought a $52.2 billion fine, but the agency agreed to waive that amount on the condition that FTX complies with its restructuring plan.

FTX collapsed in November 2022 amid allegations of embezzlement and misappropriation of billions of dollars in customer funds involving its owners and affiliated hedge fund Alameda Research. The exchange’s founder, Sam Bankman-Fried, was sentenced to 25 years in prison and ordered to repay $11 billion.

In early May, reports emerged that FTX had raised billions of dollars more than it needed to cover its losses related to the crash; FTX CEO John Ray hailed the development as an “incredible outcome” and indicated that the exchange was prepared to fully compensate its more than 2 million customers.