FTX repayment plan faces roadblock as SEC questions stablecoin use
The United States Securities and Exchange Commission (SEC) has raised concerns over the proposed repayment strategy by the bankrupt crypto exchange FTX (CRYPTO:FTT), potentially setting the stage for legal challenges.
The SEC's reservations focus on the use of stablecoins for creditor repayments, as outlined in a filing with the United States Bankruptcy Court in Delaware dated August 30.
The regulatory body is questioning the legality and oversight of crypto assets included in the repayment plan.
FTX, once a major player in the cryptocurrency exchange market, filed for Chapter 11 bankruptcy in late 2022 following a rapid downfall.
The recent filing shows the SEC’s critical view of the proposed distribution methods in FTX's Chapter 11 Plan, particularly regarding the use of stablecoins—cryptocurrencies pegged to stable assets like the US dollar.
While the SEC does not explicitly label these transactions as illegal, it asserts its right to challenge them under US securities laws.
The filing states that “the Debtors are exploring different distribution options, including potentially distributing stablecoins to certain creditors,” and the SEC “reserves its rights to challenge transactions involving crypto assets.”
Additionally, the SEC has demanded the removal of the discharge provision from FTX’s Plan and the proposed confirmation order, alongside other amendments.
The regulatory body has also reserved the right to object to the approval of the plan if these changes are not made.
This stance by the SEC, however, appears inconsistent.
While it recently dropped enforcement actions against some stablecoin operators, it continues to reserve the right to classify dollar-backed stablecoins as "crypto asset securities."
Alex Thorn, head of research at Galaxy Digital, criticised the SEC’s approach, calling it "jurisdictional overreach."
He noted that “no one, including most other regulators and both parties, thinks the SEC should have oversight of genuine ‘number stay flat’ technologies.”
The next hearing, set for October 7, 2024, will be pivotal in determining whether FTX's repayment plan can move forward under the scrutiny of SEC regulations.
Industry stakeholders are closely watching this development, as the outcome could set a precedent for how stablecoins and other crypto assets are regulated in bankruptcy cases.
At the time of reporting, the FTX Token (FTT) price was $1.31.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Florida teens arrested in connection with a kidnapping and theft of $4M in crypto
Share link:In this post: Three Florida teens have been accused of kidnapping a man at gunpoint and forcing him to transfer $4 million worth of digital assets to them. The teens kidnapped the victim from Las Vegas and threatened to kill him and his father if he didn’t cooperate. Law enforcement agencies across the globe are now warning individuals with substantial crypto holdings to be cautious amid a rise in kidnappings.
UK icons slam AI ‘theft’ in fiery plea to Starmer before key vote
Share link:In this post: Over 400 UK artists urged PM, Keir Starmer, to strengthen copyright laws ahead of an AI legislation vote. UK government’s proposed “opt-out” rule for AI training on copyrighted content faces strong backlash. Hayao Miyazaki and others condemn AI-generated art, fueling copyright debates and legal challenges.
Americans have wiped out $3 trillion in savings in the past 3 years, mostly from stimulus checks
Share link:In this post: Americans have drained $3 trillion in savings since 2021, with excess savings now at negative $900 billion. The US savings rate dropped to 3.9% in March, below pre-pandemic levels of 5-6%. Consumer spending rose 0.7% in March, but GDP still shrank by 0.3% due to soaring imports.

Banking the unbanked, but this time for real?
Trending news
MoreCrypto prices
More








