A New York judge approved a $12.7 billion settlement for FTX and Alameda Research to repay FTX creditors in agreement with the CFTC.
As part of a settlement with the United States Commodity Futures Trading Commission (CFTC), a New York judge has granted final sanction for the defunct crypto exchange FTX and its sister trading firm Alameda Research to remit $12.7 billion to FTX creditors.
United States District Judge Peter Castel officially authorized the $12.7 billion consent order that FTX and Alameda entered into to resolve a 20-month-long lawsuit from the CFTC in a filing on August 7.
The settlement was initially agreed upon by FTX and Alameda on July 12. However, it was still pending final court sanction, which was granted by District Judge Castel on August 7.
It is important to note that the commodities regulator did not pursue a civil monetary sanction, which means that the entire $12.7 billion sum will be allocated to directly reimburse FTX creditors.
FTX and Alameda have reached an agreement to reimburse $8.7 billion to investors who were defrauded by the company’s founder, Sam Bankman-Fried. Additionally, they were mandated to forfeit an additional $4 billion.
The order will also permanently prohibit FTX and Alameda Research from engaging in transactions involving “digital asset commodities,” cheating or defrauding commodity customers, and purchasing or selling digital asset commodities on behalf of third parties.
FTX, which was acquired by bankruptcy expert John Ray III, designated the commodities regulator as the “most significant single creditor” in its ongoing bankruptcy case.
In December 2022, the CFTC filed a lawsuit against FTX, its former CEO Sam Bankman-Fried, and Alameda Research, alleging that the company had engaged in fraud and made misrepresentations by marketing itself as a “digital commodity asset platform.”
Based on the US dollar value of asset prices at the time of FTX’s bankruptcy filing in November 2022, the most recent iteration of the proposed FTX reorganization plan will result in a 118% return for 98% of its creditors, who have claims under $50,000.
Nevertheless, a significant number of FTX creditors expressed a preference for receiving a cryptocurrency compensation in-kind, which would account for the crypto market‘s approximately 150% increase in total market cap since FTX filed for Chapter 11 protection.
Creditors are presently conducting a vote to determine their preferred method of paying out. They are required to submit their requests by August 16, and the final decision will be rendered by US Bankruptcy Court Judge John Dorsey on October 7.
