US Court Orders Bankrupt Cryptocurrency Exchange FTX, Founded by Sam Bankman-Fried, to Pay $12.7 Billion in Full Customer Compensation
Fiona Nanna, ForeMedia News 6 minutes read. Updated 10:39PM GMT Thurs, 8August, 2024
A United States court has mandated that FTX, the bankrupt cryptocurrency exchange, must pay a staggering $12.7 billion in relief to its customers. This ruling comes in the wake of FTX’s dramatic collapse in late 2022, which left numerous users unable to access their funds.
The Commodity Futures Trading Commission (CFTC) announced the court’s decision, underscoring that FTX’s actions led to severe financial repercussions for its users. According to CFTC Chairman Rostin Behnam, FTX created a facade of security and reliability, which it then betrayed by misusing customer deposits for high-risk investments.
The repayment order enforces a settlement between the CFTC and FTX, part of the broader bankruptcy liquidation process. This settlement ensures that customers whose deposits were frozen during the company’s downfall will be fully compensated. The CFTC’s agreement stipulates that FTX must pay $8.7 billion in restitution and an additional $4 billion in disgorgement. These funds are designated to cover the losses endured by victims of the exchange’s collapse.
The settlement also includes a provision that the CFTC will not seek any payments from FTX until all customer claims are settled, including interest. This move addresses a potential obstacle to the repayment process, guaranteeing that the government’s legal actions will not deplete the resources available for customer compensation.
FTX has committed to a full recovery for its customers, based on the value of their accounts at the time of the bankruptcy filing. Despite this, some users have voiced dissatisfaction, particularly concerning the repayment amounts reflecting the significantly lower cryptocurrency values from November 2022.
FTX founder Sam Bankman-Fried, who was convicted in March for embezzling $8 billion from customers, is currently serving a 25-year prison sentence and has appealed his conviction. In the meantime, FTX has been leveraging its bankruptcy status to negotiate settlements with US regulators and former business associates, and to liquidate assets acquired with misappropriated funds. The company is in the process of soliciting votes on its bankruptcy plan, with a deadline set for August 16. FTX aims to secure final approval of its liquidation strategy by October 7.
