 "US court orders bankrupt crypto platform FTX to pay $12.7 bn to customers, users not happy")
Bankrupt cryptocurrency exchange FTX to pay $12.7 billion in relief to its customers by a US court, This order is part of a settlement between the Commodity Futures Trading Commission (CFTC). CFTC and FTX, aimed at ensuring that the exchange’s customers, who had their deposits frozen during its collapse in late 2022, receive compensation.
FTX had attracted customers by creating the impression that it was a safe platform for trading cryptocurrencies. However, it was later revealed that the company had misappropriated customer deposits to fund its own high-risk investments, leading to its downfall.
The CFTC, led by Chairman Rostin Behnam, emphasised that this settlement is crucial in holding FTX accountable and providing relief to those affected by its actions.
Under the terms of the settlement, FTX is required to pay $8.7 billion in restitution to its customers, along with an additional $4 billion in disgorgement, which will be used to further compensate victims for their losses.
The settlement also ensures that the CFTC will not collect any payments from FTX until all customer claims are fully repaid, including interest. This agreement removes a significant obstacle to the repayment process, as it prevents the government’s lawsuit from diminishing the funds available to FTX’s customers.
FTX has stated that it is committed to providing 100 per cent recovery on customer claims, based on the value of their accounts at the time of the bankruptcy filing. This repayment plan is part of the broader bankruptcy liquidation process, which includes selling off assets that were purchased using misappropriated customer funds. These assets include real estate and investments in various technology companies, including those in the cryptocurrency sector.
Impact Shorts
More ShortsThe court’s order is a critical step in resolving the fallout from FTX’s collapse, but it has not been without controversy. Some customers are dissatisfied with the proposed repayment plan, arguing that it undervalues their claims by basing repayments on the much-lower cryptocurrency prices from November 2022.
Despite this opposition, FTX is moving forward with its bankruptcy proposal, with votes on the plan due by August 16. The company plans on seeking the final approval of its wind-down plan on October 7.
The founder of FTX, Sam Bankman-Fried, who was found guilty of stealing $8 billion from customers, was sentenced to 25 years in prison in March. He has since appealed the conviction. Meanwhile, FTX continues to navigate the complexities of its bankruptcy, reaching settlements with US regulators and former business partners to facilitate the repayment of its customers. The company has not yet responded to requests for comment on the latest developments.
As FTX works to resolve its legal and financial issues, the focus remains on ensuring that its customers receive the compensation they were promised, despite the challenges posed by the ongoing bankruptcy proceedings.
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