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The United States Securities and Exchange Commission (SEC) may challenge the repayment plan of defunct cryptocurrency exchange FTX.
In an Aug. 30 document filed with the United States Bankruptcy Court in Delaware, SEC’s lawyers reserved the right to challenge the repayments made with United States dollar-pegged stablecoins. The regulator admitted that creditor repayments with stablecoins are not illegal but it still reserved the right to challenge them.
FTX’s collapse
FTX sent shockwaves throughout the cryptocurrency landscape when it collapsed in November 2022. Since then the crypto exchange tried several methods to repay its creditors — including a later-abandoned plan to reboot the business.
While many creditors requested to be given the same assets they held back, the most recent liquidation plan entails giving back the dollar value of asset prices at the time of the bankruptcy in cash or stablecoins. The regulator wrote:
“The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets.”
Furthermore, the SEC highlighted the current repayment plan has yet to choose a distribution agent. This would be the firm responsible for distributing the funds to creditors — independently of whether those payments are in stablecoins or cash.
Galaxy Digital’s head of research Alex Thorn described the filing as “the height of jurisdictional overreach” in a tweet on Monday (Sep, 2).
the SEC is again reserving the right to claim dollar-backed stablecoins are “crypto asset securities,” despite dropping their enforcement against paxos and losing their MTD on BUSD against binance in july
this is the height of jurisdictional overreach
it’s quite absurd if you… pic.twitter.com/laT6vY5i6T
— Alex Thorn (@intangiblecoins) September 1, 2024
“The SEC is again reserving the right to claim dollar-backed stablecoins are “crypto asset securities,” despite dropping their enforcement against Paxos and losing their MTD on BUSD against Binance in July.”
Thorn was hinting at the regulator dropping its investigation of stablecoin issuer Paxos for its involvement in the management of Binance’s Binance USD (BUSD) United States dollar-pegged stablecoin. The firm received a Wells notice from the SEC in mid-February 2023, warning that it intended to sue the firm for violation of investor protection laws.
Featured image: Ideogram
