FTX and CFTC Reach Landmark $12.7 Billion Settlement
Troubled crypto exchange FTX has reached an agreement with the U.S. Commodity Futures Trading Commission (CFTC). The duo agreed to shake hands on a $12.7 billion settlement.
If the settlement is approved, it could pave the way for the exchange’s reorganization and provide a measure of closure for its creditors.
Key points:
- Settlement comprises $8.7 billion in restitution and $4 billion in disgorgement.
- CFTC agrees to forgo recovery to prioritize customer and creditor compensation.
- Hearing on the settlement motion scheduled for August 6.
- FTX’s reorganization plan will compensate 98% of creditors.
The agreement was detailed in a court filing on July 12. It comes after months of negotiations between FTX and the CFTC.
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CFTC wants FTX to stick to its reorganization plan
In this agreement, the CFTC has agreed to forego its own recovery, provided FTX adheres to its reorganization plan. This decision is aimed at maximizing the funds available for distribution to FTX’s creditors and customers.
The proposed settlement is divided into two main components: $8.7 billion in restitution and $4 billion in disgorgement.
This agreement marks a major shift from the CFTC’s initial stance. The regulatory body had originally filed a complaint in 2022.
The complaint alleges fraud against FTX, its former CEO Sam Bankman-Fried, and its affiliated company, Alameda Research.
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The CFTC had initially pushed for a staggering $52.2 billion claim. However, this makes this settlement a considerable compromise.
According to FTX’s court filing, the CFTC represents “the most significant single creditor” in the Chapter 11 bankruptcy cases. By reaching this agreement, FTX potentially mitigates a substantial liability risk.
FTX’s proposed reorganization plan aims to provide 98% of its creditors with at least 118% of their allowed claims.
