FTX, a prominent cryptocurrency exchange, has proposed a significant $12.7 billion settlement deal with the Commodity Futures Trading Commission (CFTC). This proposed settlement includes a payment of $4 billion in disgorgement and $8.7 billion in restitution, with credits applied from other bankruptcy payments.
If approved, FTX and related debtors will receive credit towards the restitution amount based on the distribution of customer claims and lender claims in the Chapter 11 cases. Similarly, they will receive credit for the disgorgement amount based on their contributions to the CFTC’s stipulated claim in the Chapter 11 cases. This arrangement would allow FTX to pay the stipulated disgorgement claim within the limits of its available funds.
Under this proposed settlement, the CFTC will not pursue civil monetary penalties or any other claims against the debtors involved in the ongoing Chapter 11 cases. While the agreement is not yet finalized, the CFTC’s Enforcement Division has recommended it for consideration, with a hearing scheduled for August 6.
FTX highlighted that the CFTC had initially sought a much higher amount of $52.2 billion in various penalties and restitution. By reaching this settlement, FTX aims to resolve legal disputes, save on litigation costs, and safeguard the assets owed to creditors, including Alameda Research and former executives.
In addition to the settlement with the CFTC, FTX’s broader bankruptcy case is progressing positively. The exchange has pledged to provide creditors with over 100% of the amount owed, totaling between $14.5 billion and $16.3 billion. However, some creditors have raised concerns about the distribution plan, as it involves cash payments rather than crypto distributions, potentially leading to tax implications.
Overall, FTX’s proposed settlement with the CFTC represents a significant step towards resolving legal challenges, ensuring creditor payouts, and moving forward with the bankruptcy proceedings in a streamlined manner. By addressing these issues proactively, FTX aims to protect the interests of all parties involved and maintain the value of assets during the restructuring process.