In a recent ruling, United States District Judge Peter Castel finalized a $12.7 billion settlement, requiring FTX and Alameda Research to compensate the former’s creditors. This decision comes after a 20-month lawsuit initiated by the United States Commodity Futures Trading Commission (CFTC). The ruling mandates that FTX Trading and Alameda jointly pay $8.7 billion in restitution to those who suffered losses and $4 billion in disgorgement for gains acquired through violations. Additionally, the consent order includes a permanent ban on both entities from engaging in any fraudulent activities, as well as prohibiting them from owning or transacting digital asset commodities or representing third parties in such deals.
The lawsuit, which began in December 2022, alleged that FTX, along with its former CEO Sam Bankman-Fried and Alameda Research, deceived customers by presenting FTX.com as a digital commodity asset platform. This misrepresentation ultimately led to customer losses totaling $8 billion. Initially seeking $52.2 billion in damages, the CFTC settled for $12.7 billion, which FTX and Alameda agreed to on July 12.
CFTC’s Position and Settlement Terms
It is noteworthy that the CFTC did not pursue a civil monetary penalty in this case, ensuring that the entire $12.7 billion settlement will go towards repaying FTX creditors. This move highlights the regulator’s focus on compensating those affected by FTX’s alleged misconduct. Judge Castel’s approval on August 7 signifies the finalization of this significant settlement, bringing closure to a long-standing legal battle.
As part of FTX’s proposed reorganization plan, creditors have the option to choose between a monetary payout or a cryptocurrency settlement. The plan aims to provide a 118% return for 98% of creditors with claims under $50,000, based on asset values from FTX’s bankruptcy filing in November 2022. However, many creditors are leaning towards a cryptocurrency payout, citing the exponential growth of the market since FTX’s Chapter 11 filing. They have until August 16 to vote on their preferred payout method, with U.S. Bankruptcy Court Judge John Dorsey slated to make the final decision on October 7.
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