In a major victory for defrauded investors, the Commodity Futures Trading Commission (CFTC) has obtained a staggering $12.7 billion judgment against the now-bankrupt FTX group of companies and its key players.
This judgment against the massive fraud orchestrated by former FTX CEO Samuel Bankman-Fried and his inner circle marks one of the largest recoveries in the CFTC’s history.
Compensating FTX Victims
The U.S. District Court for the Southern District of New York entered a consent order, requiring FTX Trading Ltd. and Alameda Research LLC to pay $8.7 billion in restitution and $4 billion in disgorgement. This record-breaking monetary relief will be used to further compensate the victims who suffered losses as a result of the fraudulent activities at FTX.
“FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets,” said CFTC Chairman Rostin Behnam. “But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there,” he noted.
The consent order also finds that FTX violated the Commodity Exchange Act (CEA) and CFTC regulations, and imposes injunctions against further violations, as well as trading and registration prohibitions. The court noted that FTX had misled customers, claiming that their assets were held in “custody” and segregated from the company’s own funds, when in reality, customer funds were commingled and misappropriated. Division of Enforcement Director Ian McGinley made the following statements:
“Not only is this multi-billion dollar recovery for victims the largest such recovery in CFTC history, we achieved it with remarkable speed. FTX’s massive fraud collapsed 21 months ago and in that time the CFTC investigated, filed a complaint, and achieved what many thought was impossible at the time of the collapse – a resolution to compensate victims for the losses they suffered. I commend our Chicago-based team for their tireless efforts on behalf of FTX’s victims.”
The CFTC is seeking additional restitution, disgorgement, civil monetary penalties, permanent trading and registration bans against the defendants.
Collaboration with Authorities
The CFTC has expressed appreciation for the assistance of various government agencies, including the U.S. Department of Justice, the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Securities and Exchange Commission. The CFTC also acknowledged the cooperation of the Justice Department’s Tax Division.
“This resolution with FTX is consistent with the enforcement commitments I have long made as Chairman,” Behnam said. “But, as I have been saying for years, this is just the tip of the iceberg. In the absence of digital asset legislation to fill regulatory gaps, entities will continue to operate in the shadows without these basic tools of sound regulation, sharpening their deceptive practices and continuing to dupe customers,” he added.
The CFTC’s enforcement team, led by Carlin Metzger, Nina Ruvinsky, Yusuf Capar, among others, have been commended for their tireless efforts in securing this historic victory for the victims of the FTX collapse.
