FTX and Alameda Research Settle Lawsuit with $12.7 Billion Payout

A settlement deal has been reached between the defunct cryptocurrency exchange FTX and its associated trading firm, Alameda Research, to pay $12.7 billion to creditors. With the acceptance of a consent order by a New York judge, the Commodity Futures Trading Commission (CFTC) sparked a 20-month legal struggle that has now formally come to an end.

A court filing states that the injunction was approved by United States District Judge Peter Castel on August 7. Notably, the settlement does not impose any civil monetary penalties, even if it does oblige FTX and Alameda to make sizeable payments to creditors. But the ruling essentially prohibits the two once-powerful firms in the cryptocurrency space, FTX and Alameda, from engaging in digital asset trading or acting as middlemen in the sector.

The Fallout from FTX’s Collapse

FTX’s downfall began in late 2022 when the company filed for bankruptcy, leading to the destruction of billions of dollars in investor wealth. In response, the CFTC filed a lawsuit against both FTX and Alameda, accusing them of fraudulent practices and misrepresentations. The agency claimed that FTX falsely promoted itself as a legitimate digital commodity asset platform.

The lawsuit’s resolution marks a significant moment in the ongoing fallout from FTX’s collapse. Sam Bankman-Fried, the founder of both FTX and Alameda, has faced severe legal consequences. In March, he was sentenced to 25 years in prison and ordered to forfeit $11 billion after being convicted on seven counts of fraud, conspiracy, and money laundering.

While the settlement with the CFTC represents a substantial financial blow to the defunct companies, the lack of civil penalties has raised eyebrows. Instead, the focus remains on compensating creditors and preventing future market participation by FTX and Alameda.

This settlement marks the end of a significant chapter in the crypto industry, highlighting the severe consequences of fraudulent activities and mismanagement in the rapidly evolving digital asset space.