Crypto exchange FTX has been ordered to pay $12.7 billion to customers

A US court has ordered bankrupt cryptocurrency exchange FTX to pay $12.7 billion to its customers, the Commodity Futures Trading Commission announced Thursday.

FTX lured customers with “an illusion that it was a safe and secure place to access the crypto markets,” then diverted customers’ deposits to make their own risky investments, CFTC Chairman Rostin Behnam said in a statement .

The refund order implements a settlement between the CFTC and the bankrupt cryptocurrency exchange, which has committed to a bankruptcy liquidation that will reimburse customers whose deposits were frozen during its collapse in late 2022.

FTX said its customers will receive a 100 percent recovery of their claims against the company, based on the value of their accounts at the time it filed for bankruptcy.

The CFTC settlement resolves a potential obstacle to that refund by ensuring that the government’s lawsuit against FTX will not reduce the funds available to its customers. The CFTC agreed not to collect any payments from FTX until all of its customers are repaid, with interest.

The CFTC settlement requires FTX to pay $8.7 billion in restitution and $4 billion in disgorgement, which will be used to further compensate victims for losses suffered during the stock market crash.

FTX did not immediately respond to a request for comment.

Its founder, Sam Bankman-Fried, was sentenced in March to 25 years in prison for stealing $8 billion from customers. He appealed the conviction.

FTX used its bankruptcy to reach settlements with US regulators and former business partners and to sell assets that were purchased with misappropriated client funds, including real estate and investments in crypto and other technology companies.

FTX is currently seeking votes on its bankruptcy proposal, but is facing opposition from some customers who feel hurt by the decision to refund them based on much lower cryptocurrency prices in November 2022. The votes are due on August 16, and FTX plans to seek final approval of its liquidation plan on October 7.

(Reporting by Ward and Knauth, Writing by Dietrich Knauth and David Ljunggren; Editing by Rod Nickel, Kirsten Donovan)