Bankrupt Crypto Exchange FTX Agrees to Settle With CFTC for $12.7 Billion

The failed cryptocurrency exchange FTX and the US Commodity Futures Trading Commission (CFTC) have reached a $12.7 billion settlement, awaiting approval by a Delaware judge.

According to a court document filed on July 12 in the U.S. Bankruptcy Court for the District of Delaware, the agreement is crucial for the debtors’ proposed Chapter 11 reorganization plan. This settlement aims to resolve ongoing litigation and disputes with one of the debtors’ largest creditors, avoiding further litigation costs and delays, and mitigating the risk of significant asset reductions available for creditors.

The CFTC filed a complaint in 2022 against FTX, former CEO Sam Bankman-Fried, and subsidiary Alameda, alleging fraud and customer losses totaling $8 billion. Initially, the agency sought $52.2 billion in the settlement.

Andy Dietderich, a partner at Sullivan & Cromwell and lead attorney for FTX Debtors, explained that the CFTC pursued its lawsuit to ensure customer and cryptocurrency creditor recoveries exceeded typical Chapter 11 case levels.

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The settlement comprises $8.7 billion in restitution and $4 billion in compensation, with the latter subject to the advance payment of all creditor claims. FTX acknowledged the CFTC as the “single most significant creditor” in its Chapter 11 cases, highlighting the substantial liabilities faced by the debtors due to the actions and convictions of FTX insiders.

Alexander Stefanov