FTX Reaches $12.7B Settlement with CFTC, Paving Way for Creditor Repayment
FTX, the bankrupt cryptocurrency exchange, has agreed to a $12.7 billion settlement with the U.S. Commodity Futures Trading Commission (CFTC), marking a significant step towards resolving its ongoing legal challenges. The settlement, which is subject to court approval, comes after months of negotiations and aims to address the fallout from FTX’s collapse in November 2022.
The agreement, detailed in a July 12 court filing, comprises $8.7 billion in restitution and $4 billion in disgorgement. Notably, the CFTC has not sought a civil monetary penalty, allowing the entire sum to be directed towards compensating FTX’s creditors. This move positions the CFTC as the “most significant single creditor” in FTX’s Chapter 11 bankruptcy cases.
FTX’s CEO, John J. Ray III, and CFTC senior trial attorney Carlin R. Metzger described the proposed settlement as “an integral and valuable component” of FTX’s chapter 11 reorganization plan. They emphasized that it resolves ongoing litigation, avoids further legal costs, and mitigates the risk of diminishing assets available for creditor distribution.
The settlement comes in response to the CFTC’s December 2022 lawsuit against FTX, its former CEO Sam Bankman-Fried, and sister trading firm Alameda Research. The regulator had accused the entities of fraud and misrepresentation in marketing FTX.com as a digital commodity asset platform.
Under FTX’s proposed reorganization plan, 98% of creditors – those with claims under $50,000 – could potentially see a 118% return based on asset values at the time of the bankruptcy filing. However, some creditors have expressed a preference for cryptocurrency payouts, which would factor in the market’s 166% increase in market cap since November 2022.
The settlement hearing is scheduled for August 6 in the Bankruptcy Court for the District of Delaware. Creditors have until August 16 to vote on their preferred payout method, with U.S. Bankruptcy Court Judge John Dorsey set to make a final decision on October 7.
This development follows the conviction of Sam Bankman-Fried on seven criminal counts, including wire fraud and conspiracy to commit wire fraud, resulting in a nearly 25-year prison sentence. The U.S. Securities and Exchange Commission has also charged Bankman-Fried with fraud.
