FTX and CFTC Finalize $12.7 Billion Settlement to Repay Creditors

The US commodities regulator and bankrupt cryptocurrency exchange FTX have agreed to a $12.7 billion settlement, resolving a 19-month lawsuit.

Bankrupt cryptocurrency exchange FTX and the US commodities regulator have agreed to a $12.7 billion settlement, a crucial step in the exchange’s Chapter 11 reorganization plan.

The Commodity Futures Trading Commission (CFTC) will receive $8.7 billion in restitution and $4 billion in disgorgement from FTX, according to court documents filed late Friday. The regulator did not seek a civil monetary penalty, so the entire $12.7 billion will go towards repaying FTX’s creditors.

The CFTC had sued FTX, its former CEO Sam Bankman-Fried, and Alameda Research in December for fraud and misrepresentations in marketing FTX.com as a digital commodity asset platform.

The settlement resolves disputes with one of FTX’s largest creditors, reducing risks and helping preserve assets for distribution to creditors, the exchange said in the filing.

FTX’s reorganization plan proposes a 118% recovery for 98% of creditors, particularly those with claims below $50,000, based on asset prices in U.S. dollars at the time of its bankruptcy filing in November 2022.

However, many creditors are opting for cryptocurrency payouts, considering a 166% gain in the market since the filing. This preference could influence the final repayment amounts and methods.

A hearing on the settlement is scheduled for Aug. 6 in the Bankruptcy Court for the District of Delaware. Creditors are also voting on their preferred payout method and have until Aug. 16 to submit their votes. Judge John Dorsey will make a final decision on Oct. 7.

“Given the conduct, guilty pleas, and convictions of the FTX Insiders, the Debtors face very substantial potential liability to the CFTC,” FTX said in the filing, underscoring the gravity of the situation.