In a landmark decision, United States District Judge Peter Castel has officially approved a $12.7 billion settlement between the bankrupt cryptocurrency exchange FTX and its affiliate Alameda Research. The settlement, part of an agreement with the United States Commodity Futures Trading Commission (CFTC), marks the end of a lengthy 20-month lawsuit initiated by the regulatory body. The ruling dictates that FTX Trading and Alameda Research must collectively pay $8.7 billion in restitution to individuals who suffered losses and $4 billion in disgorgement for profits obtained through their misconduct.
Included in Judge Castel’s approval is a consent order that imposes significant restrictions on FTX and Alameda Research’s activities moving forward. The order prohibits the entities from engaging in deceptive practices, fraud, or misconduct aimed at customers or any other individuals. Furthermore, FTX and Alameda are barred from participating in transactions involving digital asset commodities and from acting as intermediaries in such transactions on behalf of third parties.
The lawsuit, first filed in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of fraudulent behavior and misrepresentation. The entities allegedly misrepresented FTX.com as a digital commodity asset platform, leading to customer losses totaling $8 billion. Initially seeking $52.2 billion in damages, the CFTC ultimately settled on the $12.7 billion figure after negotiations with FTX and Alameda.
FTX and Alameda agreed to the settlement terms on July 12, with Judge Castel granting final approval on August 7. Notably, the CFTC opted not to pursue a civil monetary penalty, ensuring that the entire $12.7 billion will be allocated towards repaying FTX creditors. As part of its proposed reorganization plan, FTX aims to deliver a 118% return to 98% of creditors with claims below $50,000. The plan, rooted in asset valuations from FTX’s bankruptcy filing, has garnered mixed responses from creditors. Many creditors are exploring the option of receiving cryptocurrency payments, reflecting the industry’s growth since FTX’s Chapter 11 bankruptcy filing.
Creditors have until August 16 to cast their votes on their preferred method of payment, with U.S. Bankruptcy Court Judge John Dorsey expected to make a final decision on October 7. The outcomes of these decisions will shape the future trajectory of FTX, Alameda Research, and the broader cryptocurrency exchange landscape as regulatory bodies and market participants navigate this significant settlement.
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