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US court orders FTX to pay USD 12.7 billion to users

Monday 12 August 2024 10:28 CET | News

Cryptocurrency exchange FTX has been charged by a US court to pay USD 12.7 billion to its customers, with the repayment order implementing a settlement between the CFTC and the firm. 

As per the information detailed in the press release, the Commodity Futures Trading Commission (CFTC) announced that the US District Court of the Southern District of New York moved towards a consent order of permanent injunction and other equitable relief against FTX, with the latter being instructed to pay USD 12.7 billion in monetary damages to its customers and victims of the company’s fraudulent activities. As part of the order, authorities mandated the company to pay USD 8.7 billion in restitution and USD 4 billion in disgorgement, with the sum being leveraged to further compensate victims for losses caused by the fraudulent scheme orchestrated by the firm.

Cryptocurrency exchange FTX has been charged by a US court to pay USD 12.7 billion to its customers, with the repayment order implementing a settlement between the CFTC and the firm.

FTX’s case: background and repayment agreement 

The repayment order follows a bankruptcy liquidation that is set to repay customers whose deposits were locked during FTX’s November 2022 collapse. The downfall was caused by an increase in customer withdrawals that exposed a USD 8 billion hole in FTX’s accounts, with the bankruptcy substantially impacting the crypto markets and affecting other coins, including Bitcoin and Ethereum.

The US court’s current order underlines that FTX violated the Commodity Exchange Act (CEA) and CFTC regulations, which imposed injunctions against further violations and trading and registration prohibitions. This required FTX and its representatives to cooperate with the CFTC in its ongoing litigation. As part of a related settlement agreement approved by the Bankruptcy Court for the District of Delaware, the CFTC permitted not to require a civil monetary penalty against the firm and to subordinate its claims to those of victims of FTX’s fraud scheme. At the time of the announcement, the plan in which payments by FTX towards its CFTC disgorgement obligation to be leveraged to further compensate victims via a supplemental remission fund, is still subject to approval in the bankruptcy proceeding.

In addition, the CFTC agreement is set to settle a potential obstruction to the repayment, ensuring that the authorities’ lawsuit against FTX cannot minimise the funds available to customers. The regulator decided not to collect any payment from the company until all its users are repaid, with interest. As detailed by Reuters, when contacted, FTX did not immediately respond to a request for comment regarding the matter.

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Keywords: cryptocurrency, online fraud, cryptocurrency exchange, crypto, regulation
Categories: DeFi & Crypto & Web3
Companies: FTX
Countries: United States
This article is part of category

DeFi & Crypto & Web3

FTX

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