- Based on a court filing made on July 12 in the U.S. Bankruptcy Court for the District of Delaware, the two had been in negotiations for the past few months.
- The CFTC agreed to pay nothing as part of the settlement as long as FTX follows through on its reorganization plan. FTX will thus, subject to available cash, pay creditors up to $12.7 billion.
A $12.7 billion settlement between the U.S. Commodity Futures Trading Commission and bankrupt cryptocurrency exchange FTX is contingent upon approval from a Delaware judge.
Based on a court filing made on July 12 in the U.S. Bankruptcy Court for the District of Delaware, the two had been in negotiations for the past few months.
According to the filing, the planned Settlement is a crucial and significant part of the Debtors’ planned chapter 11 reorganization plan. It ends current legal action and disagreements with one of the Debtors’ biggest creditors, prevents the expense and delay of further litigation, and lessens the likelihood that the assets available for distribution to creditors would decrease significantly.
The CFTC filed a complaint in 2022 alleging that Alameda committed fraud and that the exchange, former FTX CEO Sam Bankman-Fried, and Alameda’s actions cost clients $8 billion. The agency had originally pressed for a $52.2 billion claim, according to the settlement proposal.
The settlement stipulates that the CFTC will not get any money as long as FTX follows through on its reorganization plan. Consequently, FTX would, subject to available cash, reimburse creditors up to $12.7 billion.
According to Andy Dietderich, lead counsel for the FTX Debtors and partner at Sullivan & Cromwell, in an email, “in this bespoke settlement, the CFTC foregoes its own recovery against FTX in an effort to increase client and bitcoin lender recoveries above and beyond what is usually seen in chapter 11 proceedings.”
$8.7 billion in restitution and $4 billion in disgorgement are the two halves of the settlement agreement. According to the statement, the $4 billion in disgorgement would be paid when all creditors’ claims have been paid in full.
The CFTC is the largest single creditor in Chapter 11 bankruptcy proceedings, according to FTX’s court filing.
The Debtors noted in the complaint that they could be subject to significant potential liabilities from the CFTC due to the actions, guilty pleas, and convictions of the FTX Insiders.
The settlement motion will be heard on August 6.
In late 2022, FTX filed for bankruptcy. In May, the debtors made their restructuring plan public, stating that they will distribute at least 118% of their allowable claims to 98% of their creditors. The scheme states that following court approval, creditors with permitted claims under $50,000 will be able to receive the 118% compensation.
Some have questioned the scheme and suggested the estate should pay out cryptocurrencies in kind instead of the dollar value when the exchange filed for bankruptcy. These people include representatives of FTX’s main creditor group. The plan is up for vote until August 16.
In November 2023, Bankman-Fried was found guilty on seven criminal counts, two of which was wire fraud and the other was conspiracy to commit wire fraud. She was given a sentence of over 25 years in jail. The Securities and Exchange Commission of the United States has also accused Bankman-Fried of deception.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
