- A US judge has approved a $12.7 billion settlement between FTX and the CFTC
- District Judge Kevin Castel has ordered FTX to pay $8.7 billion in restitution and $4 billion in disgorged gains
- The CFTC will now prioritize compensating creditors over pursuing additional civil monetary penalties against FTX
A $12.7 billion settlement between FTX and the Commodity Futures Trading Commission (CFTC)has been approved by a US judge, ensuring that customers who suffered significant losses due to the exchange’s fraudulent activities will be compensated. US District Judge Kevin Castel confirmed that FTX will pay $8.7 billion in restitution and an additional $4 billion in disgorged gains, aimed at further compensating the victims. The CFTC will now not pursue additional civil monetary penalties against FTX and will instead focus on getting these funds to creditors.
FTX Created “Illusion” That It Was Safe
The CFTC and FTX agreed on the bumper settlement last month following the former’s initial claim for $52.2 billion, with the agency alleging that the exchange drew customers in with “an illusion that it was a safe and secure place to access crypto markets,” according to CFTC Chairman Rostin Behnam.
Instead, Sam Bankman-Fried and his cohorts misused their deposits for its own high-risk ventures, leading to its collapse in November 2022. However, Judge Castel noted that the issues in fact surfaced the prior May when many FTX customers began requesting to withdraw assets from the exchange, only to discover that their assets weren’t readily available.
Instead of being honest with customers, Judge Castell added, Bankman-Fried and others at FTX publicly pretended there was a liquidity problem while internally acknowledging that the real problem was misappropriating customer funds. Even once it became obvious that FTX did not have enough funds to cover withdrawals, the exchange falsely reassured customers that all “deposits were safe.”
CFTC Won’t Pursue Further Penalties
FTX has assured that customers will receive full recovery of their claims, based on the account values at the time of the bankruptcy filing. This agreement with the CFTC removes a potential obstacle to repayment, ensuring that the government’s lawsuit will not diminish the funds available to customers.
To expedite victim compensation, the CFTC has chosen not to pursue additional civil monetary penalties against FTX, focusing instead on the rapid repayment of affected customers.
