In a significant ruling, a United States court has ordered the bankrupt cryptocurrency exchange FTX to pay $12.7 billion to its customers. This decision comes as part of the company’s ongoing bankruptcy liquidation process, aimed at reimbursing customers whose funds were locked when FTX collapsed in late 2022.

How FTX Misled Its Customers

According to the Commodity Futures Trading Commission (CFTC), FTX created an illusion of being a secure platform for crypto trading. However, the company misappropriated customer deposits to fund its own risky investments. CFTC Chairman Rostin Behnam highlighted the severity of the deception in a recent statement.

As part of the settlement with the CFTC, FTX has committed to repay its customers based on the value of their accounts at the time of the bankruptcy filing. The court-ordered payment includes $8.7 billion in restitution and an additional $4 billion in disgorgement to further compensate victims of the exchange’s collapse.

Impact on FTX’s Bankruptcy Plan

This settlement resolves a significant hurdle in FTX’s bankruptcy process, ensuring that government lawsuits will not diminish the funds available to repay customers. The CFTC has agreed to delay collecting any payment from FTX until all customer claims are fully repaid, with interest.

FTX’s founder, Sam Bankman-Fried, was sentenced to 25 years in prison earlier this year for stealing $8 billion from customers. He has since appealed the conviction.

Next Steps for FTX

FTX is currently seeking approval for its bankruptcy wind-down plan, which has faced opposition from some customers. These customers are dissatisfied with the decision to base repayments on the lower cryptocurrency prices from November 2022. The final vote on this proposal is due on August 16, with a court hearing for final approval set for October 7.

As FTX continues to navigate its complex bankruptcy proceedings, the focus remains on repaying its customers. The outcome of the August vote and the October hearing will be crucial in determining the final resolution for those affected by the exchange’s collapse.