United States District Judge Peter Castel has approved a settlement allowing the now-defunct crypto exchange FTX and its sister trading firm, Alameda Research, to repay $12.7 billion to creditors. This decision resolves a lawsuit filed by the United States Commodity Futures Trading Commission (CFTC) that has been ongoing for 20 months.
The settlement, first agreed upon by FTX and Alameda on July 12, received final approval from Judge Castel on August 7. Under this agreement, FTX will not face a civil monetary penalty, allowing the entire $12.7 billion to be used to reimburse creditors.
FTX and Alameda will pay back $8.7 billion to investors defrauded by FTX founder Sam Bankman-Fried and will disgorge an additional $4 billion. The order permanently prohibits FTX and Alameda from engaging in fraudulent activities with commodity customers, entering into transactions involving digital asset commodities, and buying or selling digital asset commodities on behalf of third parties.
FTX, currently managed by bankruptcy expert John Ray III, named the CFTC as the most significant single creditor in its ongoing bankruptcy case. The CFTC sued FTX, former CEO Bankman-Fried, and Alameda Research in December 2022, accusing them of fraud and false representation as a “digital commodity asset platform.”
The proposed FTX reorganization plan aims to provide a 118% return for 98% of its creditors, specifically those with claims under $50,000, based on asset prices at the time of FTX’s bankruptcy filing in November 2022. However, many creditors have expressed interest in receiving their payouts in cryptocurrency, reflecting the crypto market’s approximate 150% increase in total market capitalization since FTX filed for Chapter 11 protection.
Creditors are currently voting on their preferred method of payout and have until August 16 to submit their requests. A final decision will be made by US Bankruptcy Court Judge John Dorsey on October 7.