New York Judge Approves $12.7 Billion Settlement for FTX and Alameda to Repay Creditors

United States District Judge Peter Castel has finalized a $12.7 billion settlement, obligating the bankrupt cryptocurrency exchange FTX and its sister company Alameda Research to compensate the former’s creditors.

This decision is part of a settlement with the United States Commodity Futures Trading Commission (CFTC).

Judge Approves $12.7 Billion Settlement

Judge Castel’s approval, filed on August 7, concludes a 20-month-long lawsuit initiated by the CFTC.

The filing mandates that FTX Trading and Alameda jointly pay $8.7 billion in restitution to those who incurred losses and $4 billion in disgorgement for gains obtained through their violations.

The consent order also permanently bans FTX and Alameda Research from cheating or defrauding, or attempting to cheat or defraud, willfully deceiving, or attempting to deceive customers or other persons.

They are also banned from owning or entering into any transactions involving digital asset commodities and from ever buying or selling digital asset commodities on behalf of third parties.

The Lawsuit Details

The lawsuit, initiated in December 2022, accused FTX, its former CEO Sam Bankman-Fried, and Alameda Research of engaging in fraud and misrepresentation by promoting FTX.com as a digital commodity asset platform, resulting in customer losses of $8 billion.

The CFTC originally pursued a $52.2 billion claim, which has now been settled at $12.7 billion. FTX and Alameda agreed to this settlement on July 12, with final approval granted by Judge Castel on August 7. The CFTC did not also seek a civil monetary penalty, ensuring the entire $12.7 billion will be used to repay FTX creditors.

Meanwhile, FTX’s proposed reorganization plan targets a 118% return for 98% of creditors with claims under $50,000, based on asset values from FTX’s bankruptcy filing in November 2022.

Many creditors, however, prefer a cryptocurrency payout, reflecting the market’s growth since FTX’s Chapter 11 filing. Creditors have until August 16 to vote on their preferred payout method, with U.S. Bankruptcy Court Judge John Dorsey making the final decision on October 7.