US Judge Orders FTX, Alameda To Pay A Staggering $12.7 Billion To Creditors

The FTX verdict is out. US District Judge Peter Castel approved a $12.7 billion deal that requires the failed exchange FTX and its sister trade company, Alameda Research, to pay their debts.

On August 7, 2024, a verdict was issued that concludes a protracted legal dispute with the US Commodity Futures Trading Commission (CFTC), which originated after FTX’s sudden decline in late 2022.

The deal represents a significant stride in addressing the financial issues stemming from one of the biggest corporate disasters in the history of crypto.

With $8.7 billion reserved especially for investors misled by former CEO Sam Bankman-Fried, the proposed settlement calls for the whole $12.7 billion to be distributed to repaying FTX creditors.

BREAKING: FTX & ALAMEDA FINAL APPROVAL HANDED DOWN, ORDERED TO PAY BACK $12.7 BILLION TO FTX CREDITORS pic.twitter.com/kf3QlJVIuB

— Kyle Chassé (@kyle_chasse) August 8, 2024

Additionally surrendered as part of the arrangement will be the remaining $4 billion. This choice coincides with FTX under the direction of restructuring specialist John Ray III navigating its bankruptcy process.

Terms And Conditions For Settlement

The settlement is noteworthy as it does not impose any civil monetary penalties on Alameda or FTX, which has sparked debates about responsibility after their fall-off. Rather, the emphasis is on accelerating the reimbursement process to creditors who lost significant sums during the companies’ collapse. One of the most important creditors in this situation, the CFTC greatly influenced the settlement terms.

The agreement also forbids corporations from using deceptive tactics concerning trade of digital asset commodities and consumers of commodities permanently. This action seeks to stop present misbehavior and rebuild investor trust in the digital currency space.

Creditors’ Recovery And Future Prospects

The deal gives creditors a possible way to get their money back. It includes a reorganization plan that would give 118% back to 98% of creditors with claims under $50,000, based on the prices of FTX’s assets in November 2022, when it filed for bankruptcy.

Some creditors, on the other hand, want to be paid in cryptocurrencies, which have grown by 150% since the bankruptcy was filed.

Creditors must select bitcoin or fiat money by August 16. US Bankruptcy Court Judge John Dorsey will decide how to distribute settlement monies, reflecting market prices.

The Wider Impact Of FTX Collapse

The collapse of FTX has reverberated around the world and had big effects, especially in the cryptocurrency sector. People are calling for stricter rules 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 faith in digital asset markets.

The crypto market will be attentively observing the events around FTX and Alameda as the settlement progresses. The result of this case may establish a standard for future bankruptcy processes involving crypto companies, thus stressing the need to set in place effective systems meant to safeguard investors.

The approval of the $12.7 billion settlement marks a turning point in the continuous story of FTX and Alameda because it gives hope for creditors trying to recoup their investments and highlights the urgent need for change in the crypto sector.

Featured image from Michael M. Santiago/Getty Images, chart from TradingView