Failed crypto exchange FTX has been ordered by a court in the US to pay $12.7bn as compensation to people who lost money when it collapsed. This decision comes months after founder Sam Bankman-Fried was jailed for 25 years for his part in the company’s financial meltdown.
FTX Ordered to Return $12.7bn to Customers
The Commodity Futures Trading Commission (CFTC) decided the compensation figure, making it the most significant recovery of this nature in its history. The Commission said it would look to get funds back to everyone affected by this massive fraudulent scheme.
FTX went bust in 2022 during a price crash that saw the crypto market plunge into losses. When sentenced in March, Bankman-Fried was ordered to give up $11bn of assets. The company was worth $32bn at its height but used funds deposited by customers to make high-risk investments using Alameda Research, a firm co-founded by Bankman-Fried.
It was also revealed that Bankman-Fried used customer funds to pay for luxury cars, overseas properties and political donations. When a vast cash shortfall was discovered, customers tried desperately to get their money out and were shocked to learn that it no longer existed.
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Prosecutors called it an old-fashioned embezzlement disguised by the use of new technology, with Bankman-Fried being accused of stealing $8bn from FTX users.
CFTC chair Rostin Behnam said:
FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets. 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 also stated that this case indicated that greater regulation of cryptocurrencies and digital assets is needed.
