FTX and Alameda Ordered to Pay $12.7 Billion for Fraud

The Commodity Futures Trading Commission (CFTC) announced on Thursday that the U.S. District Court for the Southern District of New York has issued a consent

A U.S. district court has ordered FTX and Alameda Research to pay $12.7 billion to fraud victims, concluding a months-long legal battle over the misuse of customer funds and fraudulent practices at the now-bankrupt cryptocurrency exchange.

The Commodity Futures Trading Commission (CFTC) announced the court order on Thursday, stating that FTX Trading Ltd. and Alameda Research LLC are ordered to jointly and severally pay a total money judgment of $12,727,020,164. Of the total amount, $8,733,297,430.24 is ordered to be paid by FTX as restitution, while the remaining $4,000,000,000 is ordered to be paid by Alameda as disgorgement.

The disgorgement will be used to further compensate victims for losses suffered as a result of the massive fraudulent scheme orchestrated by Samuel Bankman-Fried, his now-bankrupt FTX group of companies, and a core group of FTX insiders, the announcement details.

The court found that FTX misled its customers by falsely representing that it would safeguard their assets on the platform, while in reality, commingling and misusing those funds. The order also permanently enjoins FTX and Alameda from further violations of the Commodity Exchange Act (CEA) and CFTC regulations and orders them to cooperate with the CFTC in its ongoing litigation.

“Not only is this multi-billion dollar recovery for victims the largest such recovery in CFTC history, we achieved it with remarkable speed,” said Ian McGinley, Director of the CFTC’s Division of Enforcement. “Together with our law enforcement partners, the CFTC will continue to aggressively pursue actions to hold wrongdoers accountable for fraud in the digital assets markets and to return money to victims as quickly as possible.”

The CFTC filed a civil enforcement action against FTX, Alameda, Bankman-Fried, Caroline Ellison, Gary Wang, Nishad Singh, and Ryan Salame in December 2022, alleging fraud, false statements, material omissions, and aiding and abetting in connection with a scheme to defraud FTX’s digital asset trading customers. Ellison and Wang previously pleaded guilty to the charges against them and are cooperating with the government.

The court previously granted summary judgment against FTX and Alameda on liability for the CFTC’s fraud claims on May 12. Following a bench trial on the remaining issues, including the amount of restitution, disgorgement, and civil monetary penalties, the court issued its findings of fact and conclusions of law on June 28.

“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.”

“The speed at which the CFTC and the Justice Department were able to investigate, charge, try, convict, and now obtain this massive judgment for victims of FTX’s fraud is a testament to the skill and dedication of government lawyers, law enforcement, and bankruptcy professionals,” Behnam added. “Together, we will continue to work tirelessly to ensure that victims are compensated for their losses and that the fraudsters behind this scheme are held fully accountable.”

What do you think about the FTX and Alameda fraud case and the court ordering them to pay $12.7 billion to victims? Let us know in the comments section below.

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