FTX Ordered to Pay $12.7 Billion in Relief to Customers by U.S. Court
In a groundbreaking decision, a U.S. court has ruled that bankrupt cryptocurrency exchange FTX must pay $12.7 billion in relief to its customers, as announced by the Commodity Futures Trading Commission. The court found that FTX had lured customers in with false promises of safety and security, only to misuse their deposits for risky investments.
The repayment order stems from a settlement between the CFTC and FTX, with the exchange committing to a bankruptcy liquidation process to repay customers whose funds were locked up during its collapse in late 2022. FTX has assured that customers will receive 100% recovery on their claims, based on the account values at the time of bankruptcy filing.
The agreement with the CFTC ensures that government lawsuits will not hinder customer repayments, with FTX required to pay $8.7 billion in restitution and $4 billion in disgorgement. These funds will go towards compensating victims for losses incurred during the exchange's downfall.
FTX's founder, Sam Bankman-Fried, is currently serving a 25-year prison sentence for embezzling $8 billion from customers. The exchange has used its bankruptcy proceedings to settle with regulators and business partners, as well as sell off assets purchased with misappropriated funds.
While FTX is seeking approval for its wind-down plan, some customers are dissatisfied with the proposed repayment amounts based on lower cryptocurrency prices from November 2022. Votes on the bankruptcy proposal are due on Aug. 16, with a final decision expected on Oct. 7.
This landmark case serves as a cautionary tale for investors in the volatile world of cryptocurrencies, highlighting the importance of due diligence and vigilance when entrusting funds to exchanges. It also underscores the regulatory oversight needed to protect consumers and ensure fair treatment in the event of financial turmoil.