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The US regulator did not seek a monetary penalty from FTX, which means the massive settlement will be used to pay back its creditors.
Disgraced crypto platform FTX has reached a settlement with the US Commodity Futures Trading Commission (CFTC), which will see the platform pay $12.7bn to resolve an ongoing lawsuit.
The deal – subject to court approval – will pay $4bn in disgorgement fees. This type of penalty is a remedy that requires a company to give up profits it obtained from illegal or wrongful acts. Another $8.7bn will be paid in restitution fees.
The CFTC will not seek a monetary penalty from FTX, which means the penalties will be used to pay back FTX creditors. The court filing says this proposed settlement is an “integral and valuable component” of FTX’s bankruptcy reorganisation plan.
“It resolves ongoing litigation and disputes with one of the largest creditors of the [FTX], avoids the cost and delay of further litigation, and mitigates a significant risk of diminution of the assets available for distribution to creditors,” the filing states.
A hearing on the settlement is planned for 6 August in the Bankruptcy Court for the District of Delaware.
The CFTC sued FTX, Alameda research and the owner of both companies Sam Bankman-Fried towards the end of 2022, after the crypto exchange plummeted into bankruptcy in one of the worst crypto collapses in history that left a large amount of customer funds missing.
FTX’s fall happened rapidly after a CoinDesk article claimed the balance sheet of Alameda – Bankman-Fried’s research hedge-fund – held billions of dollars worth of FTX’s cryptocurrency. FTX saw around $6bn of withdrawals within 72 hours after growing concerns saw a customer exodus from the platform.
This collapse was one of the biggest financial fraud cases in US history, as Bankman-Fried was found to have used FTX as a money laundering vehicle and stole FTX customer funds to fuel Alameda.
In the end, the disgraced crypto founder was sentenced to 25 years in prison for stealing from customers of FTX. His 25-year sentence was significantly shorter than what prosecutors were hoping for – at one stage, he could have faced up to 115 years behind bars.
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