After 19 months of legal battles, bankrupt cryptocurrency exchange FTX and the U.S. Commodity Futures Trading Commission (CFTC) have reached a tentative agreement worth a staggering $12.7 billion. This settlement, if approved by the court, will be used entirely to repay FTX's creditors, bypassing any additional fines.
This agreement, finalized after lengthy negotiations, hinges on court approval. Both sides acknowledge its significance. The CFTC's senior attorney and FTX's CEO highlight how it streamlines the Chapter 11 reorganization process by avoiding further legal costs and safeguarding assets for creditors.
Back in December 2022, the CFTC filed suit against FTX, its former CEO Sam Bankman-Fried, and its sister firm Alameda Research. The accusations centered around deceptive marketing practices related to FTX's digital commodity platform. The settlement itself consists of $8.7 billion in restitution and an additional $4 billion in disgorgement.
Considering the legal troubles faced by FTX insiders, the CFTC opted to forgo additional financial penalties. This reflects the substantial burden FTX already faces as the CFTC remains the largest creditor in the bankruptcy case.
A court hearing for the settlement is set for early August. FTX's proposed plan offers a potential 118% return to creditors with claims under $50,000, based on November 2022 asset values (the time of FTX's bankruptcy filing). However, there's a twist - many creditors favor cryptocurrency payouts, reflecting the market's substantial growth since the filing. Creditors have until mid-August to choose their preferred method, with a final decision anticipated in October.