FTX, a former exchange run by Sam Bankman-Fried, has reached a settlement with the CFTC for $12.7 billion after a 19-month lawsuit. The court still needs to approve the agreement, but both parties have agreed to the terms. This settlement is crucial for FTX’s chapter 11 reorganization plan, according to Carl R Metzger, a senior trial attorney for the CFTC, and FTX’s bankruptcy CEO, John J Ray III. It resolves ongoing disputes, avoids costly litigation, and reduces the risk of diminishing assets for creditors.
The lawsuit, filed in 2022, accused FTX and Alameda Research of fraud and falsely promoting FTX.com as a digital commodities asset platform, deceiving investors. As part of the settlement, FTX will pay $8.7 billion in restitution and $4 billion in disgorgement. The District Court of Delaware will review the settlement and repayment terms on August 6.
FTX plans to refund defrauded users 118% of their lost funds, with 98% of investors who had less than $50,000 receiving the reimbursement in US dollars. The value will be based on their assets’ worth at the time of FTX’s bankruptcy filing. Many creditors have requested repayment in cryptocurrency to account for the significant increase in the digital assets market since 2022.
Creditors are currently voting on their preferred method of repayment until August 16, with a final decision expected on October 7. This process allows creditors to choose how they want to receive what they are owed, providing them with flexibility in their compensation.