A U.S. court has ordered the bankrupt cryptocurrency exchange FTX to distribute $12.7 billion in relief to its customers, as announced by the Commodity Futures Trading Commission (CFTC) on Thursday.
FTX attracted customers by presenting itself as a safe and secure platform for accessing crypto markets. However, it later misused customer deposits for its own high-risk investments, according to a statement from CFTC Chairman Rostin Behnam.
This repayment order is part of a settlement between the CFTC and FTX, which has agreed to a bankruptcy liquidation process. This process aims to reimburse customers whose deposits were frozen during the company’s collapse in late 2022.
FTX has assured that its customers will receive a full recovery on their claims against the company, based on the value of their accounts at the time of the bankruptcy filing.
The CFTC agreement removes a potential obstacle to this repayment, as it ensures that the government’s lawsuit against FTX will not diminish the funds available to its customers. The CFTC has agreed not to collect any payment from FTX until all customers have been repaid, including interest.
As part of the settlement, FTX must pay $8.7 billion in restitution and an additional $4 billion in disgorgement. These funds will further compensate those who suffered losses due to the exchange’s downfall.
FTX did not immediately respond to requests for comment.
FTX’s founder, Sam Bankman-Fried, was sentenced to 25 years in prison in March for stealing $8 billion from customers, though he has appealed the conviction.
During its bankruptcy, FTX has reached settlements with U.S. regulators and former business partners, and it has begun selling assets that were purchased using misappropriated customer funds, including real estate and investments in crypto and other tech companies.
Currently, FTX is seeking votes on its bankruptcy proposal. However, it faces opposition from some customers who feel dissatisfied with the decision to repay them based on the lower cryptocurrency prices from November 2022. Votes are due by August 16, and FTX plans to seek final approval of its wind-down plan on October 7.