United States District Judge Peter Castel has made a definitive ruling on the $12.7 billion settlement, compelling the insolvent cryptocurrency exchange FTX and its affiliate Alameda Research to reimburse the former’s creditors. The decision stems from a settlement reached with the United States Commodity Futures Trading Commission (CFTC) following a protracted 20-month legal battle initiated by the agency.
With Judge Castel’s approval officially entered on August 7, FTX Trading and Alameda are jointly obligated to pay $8.7 billion in restitution to cover losses incurred and $4 billion in disgorgement for illicit gains generated through their transgressions. The ruling also includes a permanent injunction barring FTX and Alameda Research from committing fraud, deceit, or any form of misconduct aimed at customers or other parties. Additionally, they are prohibited from engaging in transactions involving digital asset commodities and from executing trades of digital asset commodities on behalf of third parties.
The lawsuit, which commenced in December 2022, accused FTX, former CEO Sam Bankman-Fried, and Alameda Research of perpetrating fraud and misrepresentation by promoting FTX.com as a digital commodity asset platform, resulting in customer losses totaling $8 billion. Initially seeking a $52.2 billion claim, the CFTC has now settled for the agreed amount of $12.7 billion. FTX and Alameda voluntarily accepted the terms on July 12, with Judge Castel’s final nod given on August 7. Notably, the CFTC waived any civil monetary penalty, ensuring the entire settlement sum would be utilized to compensate FTX creditors.
Meanwhile, FTX’s proposed reorganization strategy targets a 118% reimbursement rate for 98% of creditors holding claims below $50,000, based on asset valuations from FTX’s bankruptcy submission in November 2022. However, numerous creditors are advocating for a cryptocurrency payout, citing the market’s expansion since FTX’s Chapter 11 declaration. Creditors have until August 16 to select their favored repayment method, with U.S. Bankruptcy Court Judge John Dorsey slated to make the final determination on October 7.
