FTX and Alameda Reach $12.7 Billion Settlement, Ending Legal Battle with CFTC

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Major Settlement Greenlit! On August 7, U.S. District Judge Peter Castel granted final approval for a substantial $12.7 billion settlement between FTX, its trading affiliate Alameda Research, and the Commodity Futures Trading Commission (CFTC). This decision concludes a 20-month-long legal battle stemming from allegations of fraud and misrepresentation by FTX and Alameda. Interestingly, the settlement may expedite Chapter 11 cases.

Financial Breakdown

FTX and Alameda settled with the CFTC on July 12, but it was pending court approval. As part of the settlement on Aug 7, Judge Castel approved the entire $12.7 billion will be allocated to repaying FTX creditors. The agreement specifies that $8.7 billion will be returned to investors defrauded by FTX founder sam bankman fried sam bankman fried Sam Bankman Fried is a successful American entrepreneur, angel investor, and billionaire with a remarkable history in the space of the cryptocurrency industry. Being the Founder and CEO of FTX, a leading cryptocurrency exchange he has played a key role in the revolutionization and development of the crypto space through his excellent experience and potency. Sam Bankman Fried is a native of Stanford, California, United States.   Ranked as 60th on the 2022 Forbes billionaires list incorporating a net worth of US$24 Billion. Began his career working at Jane Street Capital, a trading organization that trades international ETFs. Later, in 2017 he quit Jane Street and founded Alameda Research, a quantitative cryptocurrency trading organization established in October 2017.  Bankman build an arbitrage trade, raising $25 Million every day, to take benefit from the higher price of Bitcoin in Japan in 2018.   After attending a cryptocurrency conference in 2018, in Macau, he got inspired by the concurrent crew of Bitcoin cash and built his firm, FTX according to July 2021 that averages $10 Billion of day-to-day trading volume with beyond 1 Million users that provides a policy of donating 1% of its revenue to charity. Bankman aims to support lawmakers who perform the vast game on policymaking in spaces like pandemic planning and preparedness. EntrepreneurChief Executive OfficerTrader while an additional $4 billion will be forfeited. Notably, the CFTC did not seek a civil monetary penalty, meaning all funds will directly benefit creditors. No civil penalty was imposed.

Permanent Bans Imposed

In addition to the financial terms, the settlement imposes permanent bans on both FTX and Alameda Research. These bans include prohibitions against cheating or defrauding commodity customers and engaging in digital asset commodities transactions. They are also barred from buying or selling digital asset commodities on behalf of third parties.

Reorganization and Creditor Preferences

Having said that, the reorganization plan for FTX is expected to yield a 118% return for 98% of creditors with claims under $50,000, based on the asset values at the time of FTX’s bankruptcy filing in November 2022.

However, creditors are currently debating whether to receive their payouts in cash or cryptocurrency, especially after the 150% rise in the crypto market since FTX’s bankruptcy.

This decision will be finalized following a voting period ending on August 16, with U.S. Bankruptcy Court Judge John Dorsey set to make a final determination on October 7.

Ongoing Developments

The lawsuit’s resolution marks a significant milestone in FTX’s bankruptcy proceedings, but the decision on the form of payouts could influence the final impact on creditors. The crypto market’s recovery since FTX’s bankruptcy adds a layer of complexity to these proceedings as creditors weigh their options in light of the recent market upswing.

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