For nearly two years, the Commodity Futures Trading Commission (CFTC) engaged in a legal battle with the defunct crypto exchange FTX and its sister trading firm, Alameda Research. However, the CFTC lawsuit may have finally come to an end after a New York judge ordered the defendants to pay $12.7 billion to creditors.
Judge Passes Historic Ruling, Asks FTX and Alameda to Settle
The historic ruling was passed on Wednesday as United States District Judge Peter Castel approved a consent order that stipulates the payment of the said amount to creditors.
While the settlement comes off as a large sum, it might be worth noting that it does not include additional civil monetary penalties, which was a subject of debate for a long time in the suit.
The order also bans both FTX and Alameda from engaging in any trading of digital assets or acting as intermediaries within the crypto market. This ban effectively puts a halt to any future market activities by the two companies, which were once major players in the digital asset industry.
FTX, once a big name in the crypto industry, fell from grace in November 2022. The company filed for bankruptcy, resulting in a devastating loss of billions in investor capital. The exchange’s collapse created a fallout that rippled through every corner of the industry, leading the CFTC to slam it with a lawsuit.
According to the regulator, FTX and Alameda had committed fraud and were not entirely honest about the nature and safety of their trading platform. Hence, the reason it sought to bring them to book.
Sam Bankman-Fried, the founder of both FTX and Alameda, was a major focus in the whole scandal. By March, a UEEx report revealed that Bankman-Fried had been convicted on multiple counts, including fraud, conspiracy, and money laundering. Given the gravity of the charges, he was sentenced to 25 years in prison after being asked to forfeit $11 billion.
This case against FTX and Alameda was a significant moment for regulation in the crypto sector. The settlement and associated penalties are expected to address the damage inflicted on creditors while also serving as a deterrent for other firms in the sector.
