- FTX and Alameda Research to return $12.7 billion to creditors following a settlement with the CFTC.
- No civil monetary penalties imposed; all funds will go directly to paying creditors.
- Settlement includes a permanent ban on FTX and Alameda from certain commodity activities.
A New York judge has ruled that the collapsed crypto exchange FTX and its affiliate, Alameda Research, will return $12.7 billion to their creditors. This decision follows their agreement with the United States Commodity Futures Trading Commission (CFTC) to settle charges of extensive fraud.
A Comprehensive Settlement
The consent order, initially agreed upon by FTX and Alameda on July 12, received its final stamp of approval from United States District Judge Peter Castel on August 7. This legal resolution concludes a lengthy 20-month litigation process spearheaded by the CFTC, which did not impose any civil monetary penalties on the entities. Instead, the entirety of the $12.7 billion will be channeled towards reimbursing the creditors of the defunct platforms.
Terms of the Agreement
Under the terms of the settlement, FTX and Alameda will compensate investors to the tune of $8.7 billion for losses incurred through deceptive practices led by FTX’s founder, Sam Bankman-Fried. An additional $4 billion is set to be disgorged. Furthermore, the order imposes a stringent prohibition on FTX and Alameda from engaging in any activities that involve cheating or defrauding commodity customers, as well as participating in transactions related to digital asset commodities on behalf of others.
Impact on Creditors and Future Proceedings
The resolution of this case marks a critical juncture in FTX’s ongoing bankruptcy saga, where the company, now under the administration of bankruptcy expert John Ray III, recognized the CFTC as a significant creditor. According to proposals laid out in FTX’s reorganization plan, there is an expectation to deliver a 118% return to 98% of its creditors, calculated based on asset values at the time of FTX’s bankruptcy in November 2022.
This plan, however, faces the complexity of creditor preferences, with many indicating a desire to be compensated in cryptocurrency to capitalize on the market’s growth since the bankruptcy filing. Creditors have until August 16 to submit their payout preferences, with a final decision by US Bankruptcy Court Judge John Dorsey anticipated on October 7.
