FTX ruling issued. US District Judge Peter Castel agreed to $12.7 billion deal This requires the failed FTX exchange and its sister trading company, Alameda Research, to pay off their debts.
On August 7, 2024, a ruling was issued ending a protracted legal dispute with the U.S. Commodity Futures Trading Commission (CFTC), which arose after FTX’s sudden decline in late 2022.
The deal represents a major step in addressing the financial issues stemming from one of the biggest corporate disasters in cryptocurrency history.
With $8.7 billion specifically earmarked for investors misled by former CEO Sam Bankman-Fried, the proposed settlement calls for the full $12.7 billion to be distributed to FTX’s repaid creditors.
BREAKING: FTX and ALAMEDA Final Approval, Order to Pay $12.7 Billion to FTX Creditors pic.twitter.com/kf3QlJVIuB
– Kyle Chase (@kyle_chasse) August 8, 2024
In addition, the remaining $4 billion will be waived as part of the agreement. This choice coincides with FTX, under the supervision of restructuring specialist John Ray III, managing the bankruptcy process.
Terms and Conditions of Settlement
The settlement is notable because it does not impose any civil monetary penalties on Alameda or FTX, which has sparked discussions about liability since their collapse. Instead, the focus is on accelerating compensation for creditors who lost significant amounts of money during the companies’ collapse. As one of the most important creditors in this situation, the CFTC had a significant influence on the terms of the settlement.
The agreement also prohibits companies from using deceptive methods in relation to the trade of digital goods and consumers of goods on a permanent basis. This measure aims to stop current bad behavior and rebuild investor confidence in the digital currency space.
Creditor recovery and future prospects
The deal gives creditors a potential way to get their money back. It includes a reorganization plan that would return 118% of the money to 98% of creditors with claims of less than $50,000, based on FTX’s asset prices in November 2022, when it filed for bankruptcy.
On the other hand, some creditors want to get paid in cryptocurrencies, which have grown by 150% since the bankruptcy filing.
Creditors must choose. Bitcoin or paper money by August 16. U.S. Bankruptcy Court Judge John Dorsey will decide how to distribute the settlement money, reflecting Market prices.
The wider impact of the FTX collapse
The collapse of FTX reverberated around the world and had major impacts, especially in the cryptocurrency sector. People are demanding stricter regulations and more investigations by the government because of this. Investors lost a lot of money when the company went out of business, and as a result, people lost confidence in the digital asset markets.
The cryptocurrency market will be closely watching the events surrounding FTX and Alameda as the settlement progresses. The outcome of this case could set the standard for future bankruptcies involving cryptocurrency companies, thus underscoring the need for effective systems to protect investors.
The approval of the $12.7 billion settlement marks a turning point in the ongoing saga of FTX and Alameda as it offers hope to creditors trying to recover their investments and highlights the urgent need for change in the crypto sector.
Featured image by Michael M. Santiago/Getty Images, chart by TradingView
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