FTX Trading Ltd. announced on Dec. 19 that it had reached a settlement with its Bahamas-based subsidiary, FTX Digital Markets, according to a press release.
The move marks a significant step in addressing the challenges that arose from the collapse of the FTX group in November 2022. It is subject to the approval of both the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of The Bahamas.
Settlement terms
Under the terms of the agreement, all FTX users, except those with pending claims, will be compensated in U.S. dollars for their losses in cash or digital assets, excluding nonfungible tokens (NFTs). Importantly, the settlement terms stipulate that any interests tied to the FTT token held against both FTX Debtors and FTX Digital Markets will be classified as equity and will not be part of the recovery process.
The customers of FTX.com will have the opportunity to vote on their preference for claim reimbursement in the second quarter of 2024, choosing whether they wish to proceed through the U.S. or Bahamas jurisdiction.
This approach aims to minimize economic disparities among claim holders and streamline the claims process. It is designed to facilitate a coordinated approach to asset distribution, ensuring that customers of FTX.com receive consistent and fair treatment irrespective of their jurisdiction. This global settlement is seen as a novel solution to the complex cross-border legal issues triggered by FTX’s downfall.
John J. Ray III, who became the CEO of FTX following its collapse under Sam Bankman-Fried, highlighted the settlement as a critical milestone, emphasizing its focus on customer interests and the complex nature of the legal challenges faced due to the conflicting filings of the FTX Debtors and FTX Digital Markets.
Light at the end of a long tunnel
The background of this settlement is rooted in the tumultuous events that led to the collapse of the FTX group. In November 2022, the exchange faced a dramatic downfall, leading to bankruptcy proceedings and legal actions.
A year later, former CEO Sam Bankman-Fried was found guilty on multiple felony counts related to the misuse of funds between FTX and Alameda Research. His sentencing is scheduled for March 2024.
Throughout the bankruptcy proceedings, FTX debtors have been actively filing motions to sell off company assets and repay creditors, with approvals for sales already granted by the court. This includes the sale of LedgerX, significant amounts in trust assets, digital assets, and a settlement with Genesis.