Court Approval for Settlement

United States District Judge Peter Castel formally authorized the $12.7 billion consent order, which FTX and Alameda signed into to settle a 20-month-long CFTC case in an Aug. 7 filing. First agreeing to the settlement on July 12, FTX and Alameda needed final court clearance, which was given on August 7.

The CFTC notably did not pursue a civil monetary penalty, so the whole $12.7 billion would be utilized to back-off FTX creditors.

Settlement Details

Alameda and FTX agreed to reimburse investors misled by founder Sam Bankman-Fried $8.7 billion as well as to wipe another $4 billion. The ruling further permanently forbids FTX and Alameda Research from ever purchasing or selling digital asset commodities on behalf of third parties, from deceiving commodity clients, from engaging in transactions involving digital asset commodities.

Taken over by bankruptcy specialist John Ray III, FTX identified the commodities regulator as the “most significant single creditor” in its continuous bankruptcy case. Claiming the company committed fraud and misled Alameda Research, its former CEO Sam Bankman-Fried, and FTX by presenting itself as a “digital commodity asset platform,” the CFTC sued both companies in December 2022

Future Steps for Creditor Payouts

Based on US dollar value of asset values at the time of FTX’s bankruptcy declaration in November 2022, the most recent version of the suggested FTX reorganizing plan would see a 118% return for 98% of its creditors—those with claims under $50,000.

But many FTX creditors have indicated that they would rather have a bitcoin dividend in-kind, which would consider the nearly 150% rise in overall market capitalization since FTX entered Chapter 11 protection. Right now, creditors are casting votes on their preferred payment method. They have until Aug. 16 to submit their claims; US Bankruptcy Court Judge John Dorsey will provide an official ruling on Oct. 7.

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