CFTC secures $1.27 billion judgment against FTX and Alameda, fines to be used for compensating victims.

The U.S. Commodity Futures Trading Commission (CFTC) recently secured a victory. The U.S. Southern District Court of New York has issued a permanent injunction and other relief measures, requiring FTX exchange and its affiliated company Alameda Research to pay a total of $1.27 billion in compensation to the victims who suffered losses due to the company's fraudulent activities.

Court Issues $12.7 Billion Compensation Order

Amount Covers Compensation and Forfeiture of Illegal Gains

The CFTC announced that the Southern District of New York court recently issued a permanent injunction and other equitable relief orders against the FTX exchange and its affiliate Alameda Research. The court ordered the two companies to pay $12.7 billion, including $8.7 billion in compensation and $4 billion in forfeiture of illegal gains, which will be used to further compensate victims. These measures are primarily aimed at compensating former FTX customers for losses suffered due to a large-scale fraud scheme orchestrated by the company's founder Samuel Bankman-Fried (SBF) and its core team.

FTX Violations of the Commodity Exchange Act

Victims to Receive Further Compensation

The court found that FTX violated the Commodity Exchange Act (CEA) and related CFTC regulations. According to the order, FTX and Alameda are required to cooperate with the ongoing litigation conducted by the CFTC. Additionally, the court noted that FTX made significant false statements to customers during its operation, including claiming that its platform was the "safest and most convenient way to buy and sell cryptocurrencies," when in fact customer funds were commingled and misappropriated.

Relevant Settlement and Future Plans

Bankruptcy Court Approves CFTC Not Seeking Fines, Prioritizing Claims for Victims

In the related settlement agreement, the Delaware bankruptcy court approved the CFTC's request, agreeing not to seek civil fines against FTX and giving priority to victims' claims over currency claims. According to the reorganization plan submitted by FTX in the bankruptcy proceedings, the forfeiture payments made by FTX will be further used for victim compensation. The plan still requires approval in the bankruptcy process.

CFTC's Position

Chairman Calls for Legislation to Fill Regulatory Gaps

CFTC Chairman Rostin Behnam stated that FTX utilized traditional fraudulent tactics to create an appearance of a secure and reliable cryptocurrency market. However, fundamental regulatory tools such as governance, customer protection, and oversight were fundamentally absent. He pointed out that while this resolution represents a significant step forward, without digital asset legislation to fill regulatory gaps, companies will continue to operate in the shadows, exacerbating their deceptive practices and continuing to mislead customers.

This agreement resolves CFTC's lawsuit against FTX, while the case against four individuals, including SBF, is ongoing. In the ongoing litigation, CFTC seeks compensation for victims, recovery of illegal gains, imposition of civil fines, permanent trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act and CFTC regulations.