The recent decision by United States District Judge Peter Castel to finalize a $12.7 billion settlement has sent shockwaves through the cryptocurrency community. This settlement obligates the bankrupt cryptocurrency exchange FTX and its sister company Alameda Research to compensate the former’s creditors. This decision is part of a settlement with the United States Commodity Futures Trading Commission (CFTC), marking the end of a 20-month-long legal battle.
Judge Castel’s approval on August 7 mandates that FTX Trading and Alameda jointly pay $8.7 billion in restitution to those who suffered losses and $4 billion in disgorgement for gains obtained through their violations. The consent order also includes a permanent ban on FTX and Alameda Research from engaging in any fraudulent activities or deceiving customers. This ban extends to owning or transacting with digital asset commodities and prohibits them from buying or selling digital asset commodities on behalf of third parties.
The lawsuit, which was initiated in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of fraud and misrepresentation. They were accused of promoting FTX.com as a digital commodity asset platform, resulting in customer losses of $8 billion. The CFTC originally sought a $52.2 billion claim, but the final settlement amount was reached at $12.7 billion. This settlement was agreed upon by FTX and Alameda on July 12 and received final approval by Judge Castel on August 7.
FTX’s proposed reorganization plan aims to offer a 118% return to 98% of creditors with claims under $50,000. This plan is based on asset values from FTX’s bankruptcy filing in November 2022. However, many creditors are expressing a preference for a cryptocurrency payout due to the exponential growth of the market since FTX’s Chapter 11 filing. Creditors have until August 16 to vote on their preferred payout method, with U.S. Bankruptcy Court Judge John Dorsey set to make the final decision on October 7.
The fallout of FTX’s $12.7 billion settlement has significant implications for the cryptocurrency industry. The strict terms of the settlement, coupled with the ongoing reorganization efforts, signal a turning point for FTX and its stakeholders. As the dust settles on this historic legal battle, the effects of this settlement will continue to reverberate throughout the cryptocurrency market.