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FTX, a bankrupt cryptocurrency exchange, and the United States Commodities
Futures Trading Commission (CFTC) have agreed to a $12.7 billion settlement.
This agreement resolves a 19-month lawsuit. The settlement follows months of
negotiations and now awaits court approval, as shown in a July 12 filing.
Settlement Includes Restitution
The CFTC sued FTX, its former CEO Sam Bankman-Fried, and FTX’s sister
trading firm Alameda Research in December 2022. The lawsuit claimed the firm
committed fraud and made misrepresentations by marketing FTX.com as a digital
commodity asset platform.
The settlement agreement includes $8.7 billion in restitution and $4 billion
in disgorgement. The CFTC did not seek a civil monetary penalty. FTX
acknowledged, “Given the conduct, guilty pleas, and convictions of the FTX
Insiders, the Debtors face very substantial potential liability to the CFTC.”
The commodities regulator is the “most significant single creditor” in
Chapter 11 bankruptcy cases, FTX added.
“The Proposed Settlement is an integral and valuable component of the
Debtors’ proposed chapter 11 reorganization plan,” said Commodity Futures
Trading Commission senior trial attorney Carlin R. Metzger and FTX’s CEO John
J. Ray III. “It resolves ongoing litigation and disputes with one of the
largest creditors of the Debtors, avoids the cost and delay of further
litigation, and mitigates a significant risk of diminution of the assets
available for distribution to creditors.”
FTX and CFTC agree to $12.7 billion settlement following months of negotiations https://t.co/18sLFikd7Y
— The Block (@TheBlock__) July 16, 2024
Settlement Hearing Scheduled August 6
A hearing on the settlement is set for August 6 in the Bankruptcy Court for
the District of Delaware. FTX’s proposed reorganization plan would see a 118%
return for 98% of the creditors with claims under $50,000, based on the US
dollar value of asset prices at the time of FTX’s bankruptcy filing in November
2022.
Many FTX creditors have expressed a
preference for a cryptocurrency payout in-kind, considering the market’s 166%
increase in market cap since FTX’s bankruptcy filing. Creditors are currently
voting on their preferred payout method. They have until August 16 before US
Bankruptcy Court Judge John Dorsey makes a final decision on October 7.
This article was written by Tareq Sikder at www.financemagnates.com.
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