New York judge approves $12.7 billion settlement between FTX, Alameda and CFTC

Author: Tom Mitchelhill, CoinTelegraph; Compiler: Wuzhu, Golden Finance

A New York judge has finally approved the defunct cryptocurrency exchange FTX and its sister trading firm Alameda Research to repay $12.7 billion to FTX creditors as part of a settlement with the U.S. Commodity Futures Trading Commission (CFTC).

In a document filed on August 7, U.S. District Judge Peter Castel formally approved the $12.7 billion consent order that FTX and Alameda signed to resolve the CFTC's 20-month-long lawsuit.

FTX agrees to pay $12.7 billion to settle CFTC enforcement action. Source: CourtListener

FTX and Alameda initially reached a settlement on July 12, but the lawsuit still needs to await final approval from the court, and District Judge Castel made a final ruling on August 7.

Notably, the commodities watchdog is not seeking civil penalties, meaning the entire $12.7 billion will go toward repaying FTX creditors directly.

FTX and Alameda agreed to repay $8.7 billion to investors defrauded by founder Sam Bankman-Fried. They were also ordered to return an additional $4 billion.

The order will also permanently ban FTX and Alameda Research from “deceiving or defrauding” commodities customers, from conducting transactions involving “digital asset commodities,” and from buying or selling digital asset commodities on behalf of third parties.

The commodities watchdog is listed by FTX (which is being taken over by bankruptcy specialist John Ray III) as its “single most significant creditor” in its ongoing bankruptcy case.

The CFTC sued FTX, its former CEO Sam Bankman-Fried, and Alameda Research in December 2022, claiming that the company committed fraud and made false statements by promoting itself as a "digital commodity asset platform."

The current version of FTX's reorganization plan would result in a 118% return for 98% of creditors (those with claims of less than $50,000), based on the dollar value of asset prices when FTX filed for bankruptcy in November 2022.

However, many FTX creditors have expressed a desire to be paid in cryptocurrency in kind, which would take into account the fact that the total market value of the cryptocurrency market has increased by about 150% since FTX filed for Chapter 11 protection.

Creditors are currently voting on how they want to be paid. They have until August 16 to file, and U.S. Bankruptcy Court Judge John Dorsey will make a final decision on October 7.