A US court mandated the bankrupt cryptocurrency exchange FTX to provide $12.7 billion in relief to its customers. The Commodity Futures Trading Commission (CFTC) announced the decision on 8 August 2024.
The decision follows FTX’s collapse in late 2022, which left many of its customers’ deposits locked, raising concerns about the exchange’s handling of funds.
The CFTC accused FTX of portraying itself as a secure platform for accessing cryptocurrency markets. However, behind this façade, the exchange allegedly misused customer deposits to fund its own high-risk ventures.
CFTC Chairman Rostin Behnam stated that FTX drew in customers under false pretences, ultimately betraying their trust by diverting their deposits for speculative investments.
EXPLORE: 4 Ways to Buy Bitcoin with a Credit Card
Settlement Between CFTC and FTX
The court’s repayment order is part of a broader settlement between the CFTC and FTX. Under this agreement, FTX has committed to a bankruptcy liquidation plan aimed at repaying customers in full. The said repayment will be based on the value of accounts at the time of the company’s bankruptcy filing.
The settlement also removes a potential obstacle for customers seeking compensation. It ensures that the government’s lawsuit will not deplete the funds available for repayment.
According to the settlement, FTX is required to pay $8.7 billion in restitution and an additional $4 billion in disgorgement. These funds are intended to compensate victims for their losses during the exchange’s collapse.
Bankrupt #crypto exchange #FTX ordered by #UnitedStates court to pay customers USD 12.7 billion
FTX imploded in 2022 amid a crypto price crash. Its founder, #SamBankmanFried, was jailed in March for 25 years after he was convicted of fraud and conspiracy to launder money.
— International Finance (@IntlFinanceMag) August 9, 2024
Notably, CFTC agreed to defer its collection of these payments until all customer claims have been fully satisfied, including interest.
FTX founder and former CEO Sam Bankman-Fried was sentenced in March to 25 years in prison for embezzling $8 billion from customers, a conviction he is currently appealing.
As part of its bankruptcy process, FTX has been working to settle disputes with US regulators and former business partners. The company has also been liquidating assets, including real estate and investments made with misappropriated funds, to bolster the funds available for customer repayments.
Currently, FTX is soliciting votes from its customers on a bankruptcy proposal that has sparked some controversy. A faction of customers has expressed dissatisfaction with the plan, which bases repayments on the much-lower cryptocurrency prices from November 2022.
Votes on the proposal are due by 16 August 2024, with FTX seeking final approval for its wind-down plan.
EXPLORE: Tom Brady Roasted For $30M FTX Crypto Scandal? Here Are The Top 5 Biggest Celebrity Crypto Losses
FTX to Begin Repayments By End of 2024
The FTX bankruptcy estate has set a goal to begin customer repayments by the end of 2024.
The process, being managed through two parallel bankruptcy proceedings, includes a Chapter 11 case. It is being overseen by a Delaware court in the US and the official liquidation of FTX Digital, its subsidiary based in the Bahamas.
Meanwhile, both entities have pledged to cooperate. This will ensure that creditors can submit claims to either process without risking a reduction in their entitled recovery. The first interim distribution to creditors is anticipated by the end of 2024, pending the completion of necessary KYC documentation.
EXPLORE: Former FTX Digital Markets Co-CEO Ryan Salame Sentenced To 7.5 Years In Prison
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
