Failed cryptocurrency exchange FTX and the US Commodity Futures Trading Commission (CFTC) have agreed to a $12.7 billion settlement and are awaiting approval of the deal by a judge in Delaware.
The two sides had been in negotiations for several months, as revealed in a court document filed July 12 in the U.S. Bankruptcy Court for the District of Delaware. The proposed settlement is a key component of the debtors' proposed Chapter 11 reorganization plan.
The agreement aims to resolve ongoing litigation and disputes with one of the debtors' largest creditors. It also aims to avoid the cost and delay of further litigation and reduce the risk of significant reductions in assets available for distribution to creditors.
The CFTC filed a complaint against the exchange, former FTX CEO Sam Bankman-Fried, and subsidiary Alameda in 2022, alleging fraud. The agency claimed its actions caused customers to lose $8 billion. Under the proposed deal, the agency initially pushed for $52.2 billion.
“In this particular settlement, the CFTC filed its own lawsuit against FTX to complete recoveries of customers and cryptocurrency creditors beyond levels typical of Chapter 11 cases,” Andy Dietderich, a partner at Sullivan & Cromwell and lead attorney for FTX Debtors, said in an emailed statement. “He gives up his gains.” said.
The settlement agreement is divided into $8.7 billion in restitution and $4 billion in compensation. According to the filing, the $4 billion compensation will be “subject to the advance payment of the claims of all creditors.”
FTX said in its court filing that the CFTC is the “single most significant creditor” in Chapter 11 bankruptcy cases. “Given the conduct, criminal convictions, and convictions of FTX Insiders, borrowers face very significant potential liabilities to the CFTC,” the filing said.
*This is not investment advice.