FTX Agrees to Settlement with CFTC
FTX has agreed to pay the Commodity Futures Trading Commission (CFTC) $4 billion in disgorgement and $8.7 billion in restitution. These payments will be adjusted by any credits received from other bankruptcy settlements, according to a filing on July 12.
Dollar-for-Dollar Credit System
If approved, the proposed settlement will give FTX and its associated debtors dollar-for-dollar credit toward the restitution amount. This credit depends on the distributions made to FTX.com and FTX.US customer claims, as well as Alameda lender claims in the Chapter 11 cases.
The debtors will also get dollar-for-dollar credit for the disgorgement amount based on the distributions made toward the CFTC’s stipulated claim in the Chapter 11 cases.
FTX will only need to pay the stipulated disgorgement claim as outlined in its eligible reorganization plan and within the limits of its available funds.
No Civil Penalty from CFTC
Under the agreement, the CFTC will not seek a civil monetary penalty. It will not have any other claims against the debtors in the ongoing Chapter 11 cases.
Proposed Settlement Awaiting Approval
The proposed settlement is not final yet. The CFTC’s Enforcement Division has recommended the agreement for consideration. The division authorized FTX to file its motion, assuming the regulator will approve the proposal before an Aug. 6 hearing.
Additionally, the proposed settlement will only become final and take effect after FTX’s eligible reorganization plan is confirmed.
Proposal Saves Money, Maximizes Payouts
FTX highlighted that the CFTC previously sought $52.2 billion in restitution, disgorgement, and civil monetary penalties. These were related to civil enforcement actions against FTX, Alameda Research, and former executives.
The company referred to the CFTC as its most significant creditor. It noted it has “very substantial potential liability” due to the actions of former executives and their convictions or guilty pleas.
FTX believes that the settlement with the CFTC will resolve ongoing litigation and disputes, save legal costs, and preserve the value of assets owed to creditors.
Progress in Bankruptcy Case
FTX’s bankruptcy case is progressing. In May, FTX announced plans to provide creditors with over 100% of the amount owed. However, some creditors have objected to the plan because it will distribute cash rather than in-kind crypto distributions, potentially introducing tax complications.
FTX expects to distribute between $14.5 billion and $16.3 billion.
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