FTX and the CFTC Reached a $12.7 Billion Settlement; Court Approval Is Pending

• FTX and CFTC settle for $12.7B, pending court approval, ending a 19-month lawsuit and aiding FTX’s Chapter 11 plan.
• The $12.7B settlement includes $8.7B in restitution and $4B in disgorgement, with no civil fines sought by the CFTC.
• FTX creditors prefer crypto payouts due to market rise, with a final court decision expected on October 7.

A $12. 7 billion settlement between the CFTC of the USA and the bankrupt cryptocurrency exchange FTX has been agreed. A July 12 public document states that court clearance is still pending for this agreement, which concludes a 19-month legal battle.

FTX CEO John J. Ray III and senior trial counsel for the CFTC Carlin R. Metzger claim that the settlement terms are essential to FTX’s Chapter 11 restructuring strategy. To these, they say, ends continuous legal proceedings, saves additional legal expenses, and reduces possible diminution of assets. According to the lawsuit, a digital commodities asset marketplace was purportedly deceptively represented as FTX.Com.

Details of the Settlement

In the $12.7 billion settlement, $4 billion in Surrender and $8.7 billion in restitution are paid. Interestingly, the CFTC decided against seeking a civil monetary fine. FTX stated that the activities and convictions of previous executives may expose the firm to responsibility to the CFTC. As a result, one of FTX’s biggest creditors has claims addressed in the settlement.

A court hearing for the settlement is scheduled for August 6 in the Bankruptcy Court for the District of Delaware. Based on asset prices from November 2022, FTX’s proposed reorganization plan aims to deliver a 118% return for 98% of creditors with claims under $50,000.

Many creditors prefer receiving cryptocurrency payouts in kind, reflecting the market’s 166% increase since FTX’s bankruptcy filing. Creditors are voting on their preferred payout method, with voting open until August 16. US Bankruptcy Court Judge John Dorsey will decide on October 7.

Why Chapter 11 Bankruptcy Matters

Chapter 11, often known as reorganization bankruptcy, allows businesses to reorganize while Protecting them from pressing creditor demands. Through this procedure, businesses can offer strategies to lower debt, increase operational efficiency, and gradually repay creditors. The CFTC originally requested $52.2 billion in civil penalties, disgorgement, and restitution, according to FTX.

FTX’s bankruptcy case continues to evolve. In May, FTX announced plans to provide creditors with over 100% of the owed amounts. However, some creditors objected to cash distributions, citing potential tax complications. The settlement with the CFTC aims to resolve disputes, reduce legal costs, and preserve asset value for creditors.