NY Judge Approves $12.7 Billion Settlement Between FTX, Alameda, and CFTC

YEREVAN (CoinChapter.com) — United States District (NY) Judge Peter Castel has approved a $12.7 billion settlement involving FTX and Alameda Research with the Commodity Futures Trading Commission (CFTC). This settlement aims to repay FTX creditors.

NY Judge Approves $12.7 Billion FTX Settlement to Compensate Creditors

On August 7, NY Judge Castel signed the $12.7 billion consent order, ending a 20-month-long lawsuit by the CFTC. FTX and Alameda agreed to this settlement on July 12, pending court approval.

The CFTC did not seek a civil monetary penalty, so the full $12.7 billion will go to FTX creditors. This decision focuses on compensating those affected by FTX and Alameda’s actions.

FTX and Alameda Ordered to Repay $12.7 Billion to Investors, Face Permanent Ban

FTX and Alameda will repay $8.7 billion to defrauded investors. They are also required to disgorge an additional $4 billion. These payments aim to address the financial losses investors faced.

The court order permanently bans FTX and Alameda from defrauding commodity customers, entering into transactions involving digital asset commodities, and buying or selling digital asset commodities on behalf of third parties.

FTX Creditors Eye Crypto Payouts Amid Bankruptcy Plan

The CFTC is the largest single creditor in FTX’s ongoing bankruptcy case, managed by John Ray III. Under the reorganization plan, 98% of creditors with claims under $50,000 could see a 118% return based on the asset prices at the time of FTX’s bankruptcy filing in November 2022.

Many creditors prefer cryptocurrency payouts in-kind, considering the 150% increase in the crypto market’s total market cap since FTX filed for Chapter 11. Creditors have until August 16 to submit their preferences, with a final decision by US Bankruptcy Court Judge John Dorsey expected on October 7.

Fraud Charges and Investor Compensation: Bankman-Fried’s Counsel Responds

The CFTC sued FTX, Sam Bankman-Fried, and Alameda Research in December 2022 for fraud and misrepresentation. The firms were marketed as a “digital commodity asset platform,” causing financial losses for investors.

The court’s focus is on compensating affected investors. By not seeking additional penalties, the settlement maximizes the funds available to repay creditors.