Coinspeaker
Crypto Exchange FTX Agrees to Settle with CFTC for Nearly $13B
Beleaguered cryptocurrency exchange FTX has finally reached an agreement with the US Commodity Futures Trading Commission (CFTC) to settle its nearly two-year-long lawsuit.
According to a recent court filing, the duo has agreed to settle the case for $12.7 billion, although the deal is subject to court approval. If approved, the market watchdog will dismiss all its charges against the bankrupt exchange and also forgo its own separate financial recovery from FTX to prioritize customers and creditors.
A 19-Month Long Court Battle
The case started in December 2022 when the CFTC filed a lawsuit against FTX, its former CEO Sam Bankman-Fried (SBF), who was recently convicted of fraud, and its sister company Alameda Research. The market watchdog alleged that the company, along with its then CEO and affiliate, violated commodities regulations and committed fraud. Additionally, the CFTC alleged that FTX presented itself as a digital commodity asset platform without authorization from the appropriate authority.
However, after 19 months of court battle between the duo, the case is finally coming to an end with the proposed settlement.
The settlement agreement includes $8.7 billion for restitution and $4 billion for disgorgement. As part of the deal, the market watchdog has decided not to pursue a civil monetary penalty against FTX.
A civil monetary penalty typically involves a financial fine imposed on a company for regulatory violations or misconduct.
Most Significant Single Creditor
Attorneys representing both sides jointly stated that the settlement is an “integral and valuable component of the Debtors’ proposed Chapter 11 reorganization plan”. CFTC’s senior trial attorney Carlin R. Metzger and FTX’s CEO John J. Ray III believe the potential resolution will be beneficial to the ongoing bankruptcy proceedings. The market watchdog is the “most significant single creditor” in the Chapter 11 bankruptcy case.
“It resolves ongoing litigation and disputes with one of the largest creditors of the Debtors, avoids the cost and delay of further litigation, and mitigates a significant risk of diminution of the assets available for distribution to creditors,” the filing reads.
It shows that the commodities regulator plans to relinquish its own recovery as long as the exchange maintains its reorganization plan.
Court Hearing Scheduled for August
The move is aimed at supporting the company’s financial stability and regulatory compliance, ultimately benefiting creditors and customers by maximizing available funds for distribution to them.
FTX’s reorganization proposal intends to offer a 118% repayment to 98% of its creditors, specifically, those with claims under $50,000, calculated based on the asset values in US dollars at the time of FTX’s bankruptcy filing in November 2022.
Meanwhile, a court hearing for the proposed settlement has been scheduled for August 6, 2024, in the Bankruptcy Court for the District of Delaware, where the judge will decide whether to accept or decline the proposal.
Crypto Exchange FTX Agrees to Settle with CFTC for Nearly $13B
