The Commodity Futures Trading Commission (CFTC) announced today (Thursday) that it has obtained a $12.7 billion judgment against FTX and Alameda Research. These funds will reportedly be used to compensate victims of the failed exchange’s fraudulent activities.

CFTC Victory in Crypto Fraud Case

The ruling, issued by the U.S. District Court for the Southern District of New York, marks the largest financial recovery in the CFTC’s history and underscores the agency’s commitment to protecting investors from fraudulent practices in the ever-changing digital asset sector.

The court’s decision requires FTX to pay $12.7 billion in monetary compensation, which includes $8.7 billion in restitution to customers and $4 billion in forfeiture. The ruling reflects the seriousness of FTX’s actions, which involved commingling and misappropriating customer funds, including digital assets like Bitcoin and Ether, despite the company’s public assurances of secure and segregated custody.

CFTC Chairman Rostin Behnam highlighted the issue, saying: “FTX used age-old tactics to create the illusion that it was a safe and secure place to access crypto markets. But the basic regulatory tools, such as governance, customer protection, and oversight that exist to identify misconduct and ultimately prevent a collapse, simply weren’t there.”

.@CFTC Obtains $12.7B Verdict Against FTX and Alameda: https://t.co/S6irxpka58

— CFTC (@CFTC) August 8, 2024

The CFTC’s case against FTX began in December 2022, shortly after the company’s collapse. The complaint, which also targeted key FTX insiders including Caroline Ellison and Gary Wang, accused them of orchestrating a massive fraud that ultimately resulted in billions of dollars in losses for investors.

Future implications for the crypto industry

FTX’s legal troubles are far from over. The CFTC continues to pursue additional lawsuits against Samuel Bankman-Fried and other top executives, seeking additional penalties and permanent injunctions against future violations.

The $12.7 billion verdict against FTX is not only a victory for the victims of the fraud, but also a pivotal moment in cryptocurrency industry regulation. With the CFTC’s victory, there is a renewed urgency for comprehensive digital asset legislation that can close the regulatory gaps that allowed FTX’s deceptive practices to flourish.

This article was written by Jared Kirui at www.financemagnates.com.