FTX Trading, Alameda Ordered to Pay $12.7 Billion in CFTC Action

The Commodities Futures Trading Commission obtained a consent order against FTX Trading Ltd. and Alameda Research LLC under which the companies must pay $12.7 billion to resolve claims that they defrauded their cryptocurrency customers, a federal district court said.

The companies must pay $8.7 billion in restitution to those who sustained losses proximately caused by violations of the Commodity Exchange Act, and $4 billion in disgorgement for gains received from misconduct, Judge P. Kevin Castel of the US District Court for the Southern District of New York said in the consent order.

The Aug. 7 order finds that the now-bankrupt FTX and Alameda made misleading statements of material fact to customers.

“FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets. But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there,” CFTC Chairman Rostin Behnam said in a statement.

Counsel for the defendants didn’t immediately respond to a request for comment.

The CFTC sued Dec. 13, 2022, alleging that FTX, Alameda, and founder Samuel Bankman-Fried violated the act and related regulations by “surreptitiously siphoning off customer funds” for their own use.

FTX and Alameda are also enjoined from having any commodity interests, and soliciting or accepting funds for the purpose of buying or selling commodity interests, among other restrictions, Castel’s order said.

The order also said FTX filed for chapter 11 bankruptcy Nov. 11, 2022.

FTX and the CFTC on July 12 presented the US Bankruptcy Court for the District of Delaware with a $4 billion bankruptcy settlement proposal.

Montgomery McCracken Walker & Rhoads LLP and Cohen & Gresser LLP represent Bankman-Fried. Sullivan & Cromwell LLP represent FTX and Alameda.

The case is CFTC v. Bankman-Fried, S.D.N.Y., No. 22-cv-10503, 8/7/24.