The two-year old lawsuit between the troubled cryptocurrency exchange FTX and the United states Commodities Future Trading Commission (CFTC) has now taken a new dimension. In a Wednesday legal filing, the exchange said it has reached an agreement with the regulator to pay $12.7 billion in settlement. However, the agreement is still subject to court approval.
Genesis of FTX crisis
Don’t forget that FTX plunged into crisis in late 2022 following a report that exposed high level of misappropriation in its balance sheet. The report revealed how Alameda Research, the sister firm of FTX tied billions of FTT as collateral for its loans. This development propelled Binance to liquidate its FTT holdings, a development which eventually threw FTX into a fully-blown crisis and left investors with losses worth billions of dollars.
Considering the heavy impact of the crisis on investors and the crypto community at large, regulators across the globe have to step in. The CFTC, for instance, sued FTX’s former CEO, Sam Bankman-Fried, alongside its sister trading firm, Alameda Research. In the lawsuit, the exchange and its executives were alleging of spearheading fraud by marketing FTX as a digital commodity asset platform.
CFTC settlement covers $8.7 billion in restitution and 4 billion in disgorgement
However, the almost 19-months long lawsuit may be coming to a close anytime soon. As per the latest filing, the settlement covers $8.7 billion in restitution and $4 billion for disgorgement. More so, the regulator will not impose a financial fine (civil monetary penalty) on FTX. In addition, the attorneys representing both parties stated that the agreement is a vital and valuable component of the debtor’s proposed Chapter 11 reorganization plan.
FTX CEO, John J Ray III said the agreement will benefit the resolution of the ongoing bankruptcy litigation and disputes with one of the debtors largest creditors. He also noted that it offers a means of avoiding the cost and delay of further litigation and reduces the significant risk of diminution of assets available for distribution to creditors.
Meanwhile, FTX plans to offer 118% repayment to 98% of its creditors. The Bankruptcy court for the District of Delaware will hear its settlement with the CFTC on August 6, 2024.
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