A New York judge has approved a $12.7 billion settlement plan that will see defunct cryptocurrency exchange FTX and its sister firm, Alameda Research, repay their creditors.
This settlement, which is part of a larger agreement with the United States Commodity Futures Trading Commission (CFTC), marks a significant milestone in the 20-month-long legal battle that began in December 2022.
The CFTC had initiated the lawsuit, accusing FTX and its former CEO, Sam Bankman-Fried, of fraud and misrepresentation. To resolve the case, FTX and Alameda have agreed to a settlement that includes $8.7 billion in restitution and $4 billion in disgorgement.
The approved FTX reorganization plan aims to provide a 118% return for 98% of creditors with claims under $50,000, based on asset prices at the time of the exchange’s bankruptcy filing in November 2022.
This payout structure has sparked keen interest, particularly among creditors who prefer a cryptocurrency payout in-kind. Some creditors resisted the proposal when it was announced earlier in the year, arguing that the plan undervalued their cryptocurrency holdings. They cited given the substantial 166% increase in the market capitalization of digital assets since FTX’s collapse.
However, the settlement comes after FTX’s new management sought court approval for a customer vote on a cash repayment plan in June 2024.
Notably, the court order has also permanently banned FTX and Alameda from defrauding commodity customers and prohibited them from engaging in transactions involving digital asset commodities on behalf of third parties.
FTX’s collapse in November 2022 had wide-reaching consequences, triggering the bankruptcy of other firms. For instance, companies like Yield App have shut down due to financial losses linked to FTX.
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