Anika Begay
The FTX verdict is in. U.S. District Judge Peter Castel has approved a $12.7 billion settlement requiring the failed FTX exchange and its sister trading company, Alameda Research, to pay off their debts.
On August 7, 2024, a verdict was issued that concludes a long-running legal dispute with the U.S. Commodity Futures Trading Commission (CFTC), which arose after FTX’s sharp decline in late 2022.
The deal represents a significant step forward in resolving the financial woes that have arisen from one of the biggest corporate disasters in cryptocurrency history.
With $8.7 billion specifically reserved for investors misled by former CEO Sam Bankman-Fried, the proposed deal calls for the entire $12.7 billion to be distributed to repay FTX’s creditors.
BREAKING NEWS: FTX AND ALAMEDA GET FINAL APPROVAL, ORDERED TO REFUND $12.7 BILLION TO FTX CREDITORS photo.twitter.com/kf3QlJVIuB
— Kyle Chassé (@kyle_chasse) August 8, 2024
Additionally, as part of the deal, the remaining $4 billion will be divested. This move coincides with FTX being led by restructuring specialist John Ray III who is managing its bankruptcy process.
Terms and conditions for the transaction
The settlement is notable because it does not impose any civil monetary penalties on Alameda or FTX, which has sparked debates about liability since their collapse. Instead, the emphasis is on speeding up the repayment process for creditors who lost significant amounts during the companies’ collapse. One of the most important creditors in this situation, the CFTC, has had a major influence on the terms of the settlement.
The agreement also permanently bans companies from using deceptive tactics regarding digital asset trading and consumer goods. This action aims to stop current misconduct and rebuild investor confidence in the digital currency space.
Debtor Recovery and Future Prospects
The deal offers creditors a possible way to get their money back. It includes a reorganization plan that would return 118% to 98% of creditors with claims of less than $50,000, based on FTX’s asset prices as of November 2022, when it filed for bankruptcy.
Some creditors, on the other hand, want to be paid in cryptocurrencies, which have increased in value by 150% since the bankruptcy was declared.
Creditors will have to choose between bitcoin and fiat by August 16. U.S. Bankruptcy Court Judge John Dorsey will decide how to distribute the settlement money, reflecting market prices.
The Broader Impact of the FTX Crash
The collapse of FTX has reverberated around the world and has had a major impact, especially on the cryptocurrency industry. Because of this, people are calling for stricter regulations and more government investigations. Investors lost a lot of money when the company went bankrupt, and as a result, people lost confidence in the digital asset markets.
The cryptocurrency market will be closely watching events surrounding FTX and Alameda as the transaction unfolds. The outcome of this case could set a standard for future bankruptcy proceedings involving cryptocurrency companies, underscoring the need to put effective systems in place to safeguard investors.
The approval of the $12.7 billion deal marks a turning point in the history of FTX and Alameda, providing hope to creditors seeking to recover their investments and underscoring the urgent need for change in the cryptocurrency industry.
Featured image by Michael M. Santiago/Getty Images, chart by TradingView
