Crypto exchange FTX to pay $12.7B in relief to customers
The US Commodity Futures Trading Commission (CFTC) has announced that a court has ordered FTX, a now-bankrupt cryptocurrency exchange, to pay $12.7 billion in relief to its customers. This decision is part of a settlement between the CFTC and FTX, following the latter's commitment to a bankruptcy liquidation plan aimed at reimbursing customers, whose deposits were frozen during its downfall in late 2022.
Misuse of customer deposits
CFTC Chairman Rostin Behnam revealed that FTX had misled customers by portraying itself as a secure platform for cryptocurrency trading, while improperly using their deposits for high-risk investments. The company has now assured that all customers will be fully compensated based on the value of their accounts at the time of bankruptcy filing. This settlement with the CFTC ensures that any legal action by the government against FTX will not deplete funds set aside for customer reimbursement.
Settlement details and customer repayment plan
The settlement terms dictate that FTX must pay $8.7 billion in restitution and $4 billion in disgorgement. The disgorged funds will be utilized to further compensate victims for losses suffered during the exchange's collapse. As per the agreement, the CFTC will not collect any payment from FTX until all its customers have been fully repaid, with interest included.
FTX founder's conviction and asset sales
In March, Sam Bankman-Fried, the founder of FTX, was sentenced to 25 years in prison for embezzling $8 billion from customers. He is currently appealing his conviction. To settle with US regulators and former business partners, FTX has been selling assets bought with misappropriated customer funds. These assets include real estate and investments in cryptocurrency and other tech companies.
