A U.S. court has mandated that bankrupt cryptocurrency exchange FTX pay $12.7 billion in relief to its customers, the Commodity Futures Trading Commission (CFTC) announced on Thursday. The ruling follows accusations that FTX lured customers with a false sense of security, only to misuse their deposits for high-risk investments.

CFTC Chairman Rostin Behnam highlighted the deceptive practices, stating that FTX created “an illusion that it was a safe and secure place to access crypto markets,” before misappropriating customer funds. This repayment order is part of a settlement between the CFTC and FTX, aligning with the exchange’s bankruptcy liquidation plan, which aims to reimburse customers whose deposits were frozen during FTX’s collapse in late 2022.

FTX has assured its customers that they will receive a 100% recovery on their claims, based on account values at the time of the bankruptcy filing. The CFTC settlement eliminates a potential hurdle to this repayment, ensuring that the government’s lawsuit against FTX will not diminish the funds available to customers. The CFTC has agreed to delay its collection until all customers are fully compensated, including interest.

The settlement requires FTX to allocate $8.7 billion in restitution and $4 billion in disgorgement, both of which will be directed toward further compensating the victims of FTX’s downfall. The exchange did not immediately comment on the court’s decision.

FTX founder Sam Bankman-Fried, sentenced in March to 25 years in prison for embezzling $8 billion from customers, has appealed his conviction. Meanwhile, FTX has been negotiating settlements with U.S. regulators and former business partners and liquidating assets acquired with misappropriated customer funds, including real estate and investments in crypto and tech companies.

As FTX solicits votes on its bankruptcy proposal, some customers express dissatisfaction with being repaid based on much lower cryptocurrency prices from November 2022. Votes are due on August 16, with FTX seeking final approval of its wind-down plan on October 7.

(Adapted from MoneyControl.com)

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