FTX, the collapsed digital asset exchange, has reached a pivotal settlement with the Commodity Futures Trading Commission (CFTC). This agreement, pending court approval, marks a crucial moment in the ongoing FTX bankruptcy saga that has captivated the crypto industry since late 2022.
The settlement involves subordinating a $4 billion CFTC claim and introduces a mechanism for additional compensation to affected cryptocurrency holders.
FTX Settlement with CFTC & Impact on Creditors
FTX, now defunct, has settled with the CFTC in a significant development for its bankruptcy case. The agreement, awaiting court approval, subordinates the $4 billion CFTC claim to creditor claims and interest.
Under this settlement, the CFTC’s $4 billion claim will be allowed but ranked below all other creditor claims and interest payments. Any funds initially destined for the CFTC will instead go to a Supplemental Remission Fund. This fund aims to provide extra compensation to adversely affected cryptocurrency holders, but only after all creditors are paid with interest and if surplus funds remain.
The settlement follows a District Court order by Judge Kaplan, which imposed a $4 billion disgorgement and $8.7 billion restitution to creditors. FTX debtors will receive dollar-for-dollar credit against the disgorgement order as part of the agreement.
A notable aspect of the settlement is its recognition that creditors with cryptocurrency-related investments were particularly harmed by the alleged illegal conduct. This recognition is partly due to over 200 victim statements sent to Judge Kaplan by FTX victims.
Controversy Among Creditors
Despite the settlement, some creditors argue that the FTX bankruptcy estate is effectively using victims’ assets to pay government fines. These fines, they contend, result from FTX’s misrepresentations to the CFTC and are being paid before fully compensating the victims at current market prices.
Restructuring Plan and FTT Token Holders
The FTX restructuring plan has encountered obstacles, especially for holders of the FTT token. The official committee of unsecured creditors announced that FTX debtors are using Kroll, a third-party administrator, to distribute voting materials and comments to creditors and customers.
Users who filed claims solely based on FTT holdings are automatically considered to reject the restructuring plan and are not given voting rights. However, these claimants can still opt into the plan releases. Customers with claims involving fiat currency, other tokens, or cryptocurrencies beyond FTT should receive a ballot for voting on the plan.
Conclusion
The FTX settlement with the CFTC is a significant step in its bankruptcy case, with implications for creditors and affected token holders. While the agreement aims to provide additional compensation through a Supplemental Remission Fund, it has sparked controversy among creditors regarding the use of victims’ assets for government fines. The restructuring plan also presents challenges, particularly for FTT token holders.