The SEC signals potential challenges to FTX’s creditor repayment plan involving stablecoins, citing concerns over transactions with crypto assets. Legal experts criticize the agency's approach.
The U.S. Securities and Exchange Commission (SEC) has indicated that it may contest the repayment plan proposed by the bankrupt cryptocurrency exchange FTX if it involves returning funds to creditors using stablecoins.
In a filing dated August 30 to the United States Bankruptcy Court in Delaware, SEC attorneys acknowledged that while the repayment of creditors using stablecoins may not be explicitly illegal, the agency reserves the right to challenge such transactions, especially those involving U.S. dollar-pegged crypto assets.
Since FTX’s collapse in November 2022, the exchange has explored various methods to compensate creditors, including a previously discarded plan to relaunch the platform. The latest liquidation strategy proposes settling creditor claims based on the U.S. dollar value of assets at the time of FTX’s bankruptcy, with payments made either in cash or stablecoins.
“The SEC is not offering an opinion on the legality of the transactions described in the Plan under federal securities laws and reserves its rights to challenge any transactions involving crypto assets,” the filing stated.
The SEC also pointed out that the current repayment plan has yet to appoint a “distribution agent,” the entity responsible for dispersing funds to creditors, whether in cash or stablecoins.
The SEC’s stance has drawn sharp criticism from figures in the cryptocurrency industry. Alex Thorn, head of research at Galaxy Digital, and Paul Grewal, chief legal officer at Coinbase, both condemned the regulator’s actions as excessive and unwarranted.
In a September 1 post on X, Thorn accused the SEC of maintaining a position that stablecoins should be considered “crypto asset securities,” despite having previously dropped its case against the issuer of Binance USD (BUSD), Paxos, in July.
“This represents an extreme overreach of jurisdiction,” Thorn argued.
Grewal echoed this sentiment, criticizing the SEC for failing to provide clear guidance and instead relying on threats and ambiguity. “Investors, consumers, and markets deserve better. Way better,” Grewal asserted in his own September 1 post on X.
