As part of the agreement, FTX will pay a $12.7 billion fine to the CFTC, along with $4 billion in restitution fees and $8.7 billion in damages, pending court approval. This settlement marks a significant step in resolving the legal issues surrounding the failed exchange.

Interestingly, the CFTC did not pursue a civil penalty against FTX. According to the regulator, the guilty pleas and convictions of FTX insiders already imposed a significant potential liability on the company.

Details of the CFTC’s Lawsuit Against FTX

The CFTC filed its lawsuit against FTX and its co-founder, Sam Bankman-Fried, in December 2022. The agency accused them of violating the Commodity Exchange Act and misappropriating investor funds. The complaint alleged that Bankman-Fried directed FTX executives to create a scheme that allowed Alameda Research, another company he controlled, to use FTX as a line of credit.

IRS Settlement

In June, FTX also settled a lawsuit with the IRS. Initially, the IRS demanded $24 billion, but the settlement resulted in FTX agreeing to pay $885 million. This amount includes a priority payment of $200 million due within 60 days after the proposed restructuring plan takes effect. The remaining $685 million will be paid after FTX completes its compensation payments to clients and creditors.

New Compensation Plan

In May, FTX proposed a compensation plan promising that 98% of creditors would receive at least 118% of their claims within 60 days of court approval. Remaining clients would receive a 100% refund. The total compensation is estimated between $14.5 billion and $16.3 billion, including assets controlled by FTX and its liquidators. This plan followed a substantial sale of cryptocurrencies, primarily investments from Alameda and FTX Ventures.

Justice and Punishment

While FTX prepares to compensate its creditors, the courts continue to hold its employees accountable. In late May, former top manager Ryan Salame was sentenced to seven and a half years in prison. Despite his cooperation with authorities and personal financial losses due to FTX's collapse, he was also fined $11 million for his role in financial crimes.

Meanwhile, FTX founder Sam Bankman-Fried is serving a 25-year sentence, handed down in March, for fraud, perjury, and tampering during his trial.

A Look Back: How FTX Collapsed

In early November 2022, CoinDesk revealed that Alameda's balance sheet was heavily reliant on FTX's token, FTT. Alameda's assets included $6.1 billion in FTT, significantly more than the circulating supply. Additionally, Alameda held substantial amounts of SOL tokens. These revelations highlighted the deep financial ties between Alameda and FTX, contradicting Bankman-Fried's previous claims.

Following the CoinDesk report, Binance founder Changpeng Zhao announced plans to sell Binance’s FTT holdings, likening the situation to the collapse of TerraUSD. This announcement caused the FTT price to plummet, leading to liquidity issues for both Alameda and FTX.

On November 11, 2022, FTX, Alameda Research, and 130 affiliated firms filed for Chapter 11 bankruptcy. At the time, Alameda had more than 100,000 creditors, with assets and liabilities estimated between $10 billion and $50 billion.

The fallout affected many companies in which FTX and Alameda had invested, including the Solana ecosystem and the BlockFi platform.