Historic compensation to put an end to one of the largest financial frauds in the United States. FTX, a cryptocurrency platform that went bankrupt in 2022, will have to pay 12.7 billion dollars (about 11.6 billion euros) to compensate for the losses suffered by customers and creditors. A New York court has ruled. An unprecedented ruling in the cryptocurrency sector and a verdict that closes the crypto scandal, one of the darkest chapters in American financial history, linked to the founder and CEO of FTX, Sam Bankman-Fried, sentenced last spring to 25 years in prison for fraud. When two years ago the platform imploded in seven days and burned 17 billion dollars. The most serious alarm bell for the crypto market in the last 20 years.
The Commodity Futures Trading Commission (CFTC), the federal agency that oversees derivatives markets, said this is the largest settlement ever imposed in a similar case. The $12.7 billion is divided as follows: it will pay $8.7 billion in compensation and $4 billion to customers whose deposits were frozen after the crash.
The story that led to Bankman-Fried’s conviction and the collapse of the cryptocurrency exchange began in November 2022, when an investigation conducted by the specialized site Coindesk revealed that Alameda Research, an investment fund managed by Bankman-Fried himself, was secretly using the assets of FTX customers and Alameda’s capital was based mainly on tokens issued by FTX itself, rather than independent assets. The entrepreneur, in addition to covering the hole in the balance sheet of the investment fund he owned, allegedly used the money that customers entrusted to the platform to live a luxurious life, buy million-dollar properties in the Bahamas, and finance the Democratic and Republican Parties. Everything collapsed when users who attempted to withdraw their funds discovered that their investments were no longer there. From there, the investigations, the trials and last March, Sam Bankman-Fried’s 25-year prison sentence. The founder and CEO of FTX was found guilty on seven counts, including money laundering, conspiracy to commit bank fraud, and defrauding FTX customers and Alameda Research creditors. One of the harshest sentences ever handed down for financial crimes in the United States. And now, a record settlement.
The FTX case has shaken the entire cryptocurrency sector, becoming a wake-up call for the market and bringing the issue of rules and security to the fore. The chairman of the CFTC, Rostin Behnam, immediately after the decision of the record compensation called on the institutions for legislation to regulate the sector: “As I have been saying for years, this is just the tip of the iceberg. In the absence of digital asset legislation that fills the regulatory gaps, there will continue to be entities that will operate in the shadows, without the basic tools of a solid regulation, increasingly refining their deceptive practices and continuing to cheat customers”. We need governance, measures to protect customers and surveillance to identify illicit behavior. All this was missing and the story of FTX is proof of this.
