[NEWS] FTX agrees to pay 1.86 trillion yen in Alameda damages

The Commodity Futures Commission (CFTC) announced on the 7th that the collapsed cryptocurrency exchange FTX and its subsidiary Alameda Research have agreed to pay $2 trillion in damages.

A judge approved the settlement between the CFTC and FTX and Alameda Research on the 7th. The settlement was submitted this summer and was awaiting the judge's approval.

As part of the settlement, FTX and Alameda will pay $8.7 billion in damages and an additional $4 billion in disgorgement.

The funds will be returned to victim creditors, and the CFTC said it will not seek civil penalties and will receive nothing. The agreement marks the end of the CFTC's lawsuit against FTX, Alameda, and former CEO Sam Bankman-Fried.

As part of the agreement, FTX and Alameda are prohibited from "holding any commodity interests or digital asset products," including but not limited to Bitcoin (BTC), Ethereum (ETH), and USDT.

They are also prohibited from receiving or accepting funds to buy or sell "digital asset products."

The order finds that FTX violated the Commodity Exchange Act (CEA) and CFTC regulations, and imposes an injunction against further violations of the CEA and CFTC regulations, as well as prohibitions against trading and registration. It must also cooperate with the CFTC in its lawsuit against FTX and Alameda. It further finds that FTX and Alameda made material misrepresentations and committed fraud against their customers.

The court noted that FTX advertised itself as "the safest and easiest way to buy and sell crypto assets," and that customer assets, including digital assets such as Bitcoin and Ethereum, were "custodianized" by FTX, and that FTX stated that as a general principle it separated customer assets from FTX's own assets, but in reality customer assets were commingled and misappropriated.

Digital Asset Law Needs to Be Developed

CFTC Chairman Rostin Behnam said, "FTX used old-school tactics to create the illusion of a safe and secure place to access crypto assets in history, but without any basic regulatory tools like governance, customer protection, or oversight to identify misconduct and ultimately prevent a collapse. As I have said for years, this is just the tip of the iceberg. Without a digital asset law to fill the regulatory gaps, entities will continue to operate in the shadows, exacerbating deceptive practices and deceiving customers."

FTX sent a proposed bankruptcy reduction plan to creditors last month, and bankruptcy proceedings are still ongoing.

The current plan requires creditor support before court approval, and creditors will receive more than 100% of their claims, but the price is pegged to the level in November 2022 when the exchange filed for bankruptcy, which is significantly lower than the current price.

Reference: CFTC announcement
Image: Shutterstock

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