SEC Warns it May Challenge FTX’s Stablecoin-Denominated Repayments Plan
Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...
The United States Securities and Exchange Commission (SEC) has cautioned that it may challenge the repayment plan of the collapsed cryptocurrency exchange, FTX, if the plan involves returning funds to creditors using stablecoins.
In a court filing on August 30 to the U.S. Bankruptcy Court in Delaware, SEC attorneys indicated that while repaying creditors with stablecoins might not be outright illegal, the agency reserves the right to contest such repayments if they involve US-dollar pegged crypto assets.
The move comes as FTX continues to explore various avenues to compensate its creditors after its dramatic collapse in November 2022.
FTX has considered several strategies to make creditors whole, including a shelved plan to revive the exchange.
The latest proposal from FTX involves liquidating assets and settling claims based on the U.S. dollar value of those assets at the time of the exchange’s bankruptcy.
Creditors would be repaid in cash or stablecoins under this plan.
“The SEC is not opining on the legality, under federal securities laws, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets,” the regulator stated in its filing.
Moreover, the SEC pointed out that the current repayment plan has yet to designate a “distribution agent”—a firm that would oversee the distribution of funds to creditors, whether in cash or stablecoins.
The SEC’s stance has sparked criticism from notable figures in the crypto community.
Alex Thorn, head of research at Galaxy Digital, and
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