FTX and CFTC Reach Settlement Agreement
FTX has agreed to pay the Commodity Futures Trading Commission (CFTC) $4 billion in disgorgement and $8.7 billion in restitution, minus amounts credited from other bankruptcy payments, according to a July 12 filing.
Simplified Payment Structure
If the proposed settlement is approved, FTX and associated debtors will receive dollar-for-dollar credit toward the restitution amount based on the amount they distribute in FTX.com and FTX.US customer claims and Alameda lender claims in the Chapter 11 cases.
The debtors will also receive dollar-for-dollar credit for the disgorgement amount based on the amount they distribute toward the CFTC’s stipulated claim in the Chapter 11 cases.
FTX would only need to pay the stipulated disgorgement claim as it is set out in its eligible reorganization plan and within the limits of its available funds.
Waiver of Civil Monetary Penalty
Under the agreement, the CFTC will not seek a civil monetary penalty and have no other claims against the debtors in the ongoing Chapter 11 cases.
Background and Context
FTX noted that the CFTC previously sought $52.2 billion in restitution, disgorgement, and civil monetary penalties related to civil enforcement actions against FTX, Alameda Research, and former executives.
It called the CFTC its most significant creditor, noting it has “very substantial potential liability” to the CFTC due to former executives’ actions and their convictions or guilty pleas.
Benefits of the Settlement
FTX believes the settlement with the CFTC should resolve ongoing litigation and disputes, save legal costs, and preserve the value of assets owed to creditors.
Proposal Saves Money, Maximizes Payouts
The proposed settlement will allow FTX to allocate its resources more effectively and distribute funds to creditors more efficiently. By resolving the CFTC claims, FTX can focus on fulfilling its obligations to other creditors and stakeholders.
Progress of FTX’s Bankruptcy Case
FTX’s bankruptcy case is progressing more broadly. In May, FTX said it would provide creditors over 100% of the amount owed. Some creditors have objected to the plan because it will distribute cash rather than in-kind crypto distributions, possibly introducing tax complications.
FTX expects to distribute $14.5 billion in cash and $16.3 billion in total.
Conclusion
The proposed settlement between FTX and the CFTC is a significant development in the ongoing bankruptcy case. By resolving the CFTC claims, FTX can focus on fulfilling its obligations to other creditors and stakeholders, and allocate its resources more effectively. The settlement is not final and will only become effective after FTX’s eligible reorganization plan is confirmed.
FAQs
What is the proposed settlement amount?
FTX has agreed to pay the CFTC $4 billion in disgorgement and $8.7 billion in restitution, minus amounts credited from other bankruptcy payments.
How will the settlement be paid?
FTX will pay the settlement amount based on the amount it distributes in FTX.com and FTX.US customer claims and Alameda lender claims in the Chapter 11 cases.
What are the benefits of the settlement?
The settlement should resolve ongoing litigation and disputes, save legal costs, and preserve the value of assets owed to creditors.
Is the settlement final?
No, the settlement is not final and will only become effective after FTX’s eligible reorganization plan is confirmed.
Will the CFTC seek a civil monetary penalty?
No, the CFTC will not seek a civil monetary penalty under the proposed settlement.
