Bankrupt exchange FTX’s lawsuit, set into motion by the US Commodity Futures Trading Commission [CFTC], has been wrapped up after almost a year and half.
The exchange has agreed to a $12.7 billion settlement with the regulator after several rounds of negotiation spanning across months.
As far as the breakdown is concerned, $8.7 billion will be directed towards restitution and the remaining $4 billion will be dedicated to disgorgement. The latter half of the equation, i.e. the disgorgement funds, will be "subordinated to the prior payment of claims of all creditors."
The regulator took legal action against FTX and its sister firm Alameda Research in December 2022. It alleged that the entities committed fraud and made misrepresentations by marketing the exchange as a digital commodity asset platform.
According to a recent filing,
"The Proposed Settlement is an integral and valuable component of the Debtors’ proposed chapter 11 reorganization plan.”
FTX’s CEO John. J Ray III and the CFTC’s Senior Trial Attorney Carlin R. Metzger further underlined that the settlement resolves ongoing litigation and disputes with “one of the largest creditors of the debtors, avoids the cost and delay of further litigation, and mitigates a significant risk of diminution of the assets available for distribution to creditors."
In the filing, FTX emphasized that the CFTC is "the most significant single creditor" in Chapter 11 bankruptcy cases, and added,
"Given the conduct, guilty pleas, and convictions of the FTX Insiders, the Debtors face very substantial potential liability to the CFTC."
With both parties now on the same page, it is now all in the hands of the court to pass a green flag. A hearing on the settlement is slated for August 6 in the Bankruptcy Court for the District of Delaware.
