CFTC Secures Record $12.7 Billion Settlement with FTX and Alameda Research

In a landmark ruling, the US District Court for the Southern District of New York has approved a $12.7 billion settlement between the Commodity Futures Trading Commission (CFTC) and the now-defunct cryptocurrency exchange FTX, along with its sister trading firm Alameda Research. This settlement, which marks the largest financial recovery in CFTC history, brings to close a 20-month-long lawsuit and represents a significant milestone in the regulation of digital assets.

Under the terms of the consent order, FTX and Alameda are required to pay $8.7 billion in restitution to defrauded customers and an additional $4 billion in disruption. The entire sum will be directed towards compensating victims of the fraud scheme, as the CFTC agreed not to seek a civil monetary penalty.

CFTC Chairman Rostin Behnam highlighted the deceptive practices employed by FTX, stating, “FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets. But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there.”

The court’s decision also imposes permanent injunctions against further violations of the Commodity Exchange Act and CFTC regulations. Notably, FTX and Alameda are now permanently banned from trading digital asset commodities and acting as intermediaries in the crypto market.

Ian McGinley, Director of the CFTC’s Division of Enforcement, emphasized the unprecedented nature of this recovery, stating, “Not only is this multi-billion dollar recovery for victims the largest such recovery in CFTC history, we achieved it with remarkable speed.”

The settlement resolves the CFTC’s litigation against FTX and Alameda but leaves the case pending against individual defendants, including former FTX CEO Sam Bankman-Fried. Bankman-Fried was previously convicted on fraud charges and sentenced to 25 years in prison.

This ruling comes as part of FTX’s ongoing bankruptcy proceedings, where the company has proposed a reorganization plan that could see 98% of its creditors receive at least 118% of their allowed claims. However, some creditors have expressed a preference for cryptocurrency payouts, given the significant increase in crypto market capitalization since FTX’s bankruptcy filing in November 2022.