SEC Raises Concerns Over FTX Creditor Repayment Plan
The ongoing saga surrounding the FTX bankruptcy has taken yet another unexpected turn with the recent intervention of the US Securities and Exchange Commission (SEC). In a recent court filing, the SEC expressed significant reservations about how FTX’s bankruptcy administrators plan to repay creditors, especially when it comes to the use of stablecoins.
Challenges Posed by the SEC for FTX Repayments
This weekend, the SEC submitted a document to the court stating that it may challenge any distribution involving crypto assets, particularly stablecoins, as part of FTX’s bankruptcy plan. This filing could further complicate the already complex process of confirming the bankruptcy plan.
SEC’s Concerns
The SEC argued that FTX debtors are exploring various distribution options, including the possibility of distributing stablecoins to certain creditors. The commission added that it does not comment on the legality, under federal securities laws, of the transactions described in the plan and reserves the right to challenge these transactions. Another point of contention raised by the SEC is the lack of clarity regarding the identity of the distribution agent, who may potentially be responsible for distributing stablecoins to creditors. This uncertainty raises concerns about compliance and the regularity of the process.
Industry Reactions, Next Steps, and Implications
This SEC intervention has been seen by some industry players as an attempt at excessive interference. Alex Thorn, Head of Research at Galaxy Digital, voiced his discontent on social media, referring to the SEC’s actions as “jurisdictional overreach”. Thorn criticized the commission for what he sees as a baseless action aimed at maintaining control over crypto asset-related transactions.
The SEC has also joined the US Trustee in requesting the removal of a clause in the plan that would discharge debtors from certain obligations. If these modifications are not made, the commission has stated that it reserves the right to oppose the confirmation of the plan as a whole.
