FTX bankruptcy faces new hurdles as SEC flags repayment concerns

The US Securities and Exchange Commission (SEC) has issued a filing expressing concerns implicit the proposed repayment strategy successful the ongoing FTX bankruptcy case.

The plan, which includes repaying creditors done stablecoins oregon different integer assets, has prompted the SEC to reserve the close to situation these transactions nether national securities laws.

The determination has drawn disapproval for perchance prolonging the process.

SEC filing

In an Aug. 30 tribunal filing, the SEC stated that portion it is not presently issuing a definitive ineligible sentiment connected these transactions, it reserves the close to situation their legality successful the future.

The filing has added different furniture of uncertainty to the already analyzable FTX bankruptcy, which involves liquidating the company’s assets to repay thousands of creditors aft the exchange’s illness successful November 2022.

The SEC’s filing besides included a petition to region a discharge proviso from FTX’s Chapter 11 Plan. This proviso would person shielded the institution from definite aboriginal ineligible liabilities, a determination that the SEC argues could forestall afloat accountability successful the bankruptcy process.

By reserving the close to entity to the plan, the SEC is signaling its intent to intimately scrutinize however FTX intends to liquidate and administer its remaining assets.

Criticism

The SEC’s attack successful the FTX lawsuit has drawn crisp disapproval from the industry, with galore arguing that the agency’s actions whitethorn pb to unnecessary delays and further complicate the bankruptcy process.

Coinbase main ineligible serviceman Paul Grewal slammed the regulator’s deficiency of clarity successful a series of tweets connected Sept. 2. Grewal pointed retired that portion the SEC has not outright declared the usage of stablecoins for creditor repayments illegal, it has near the doorway unfastened to aboriginal ineligible challenges, creating an situation of uncertainty.

He added:

“Why supply clarity to the marketplace erstwhile threats and aspersions volition do? Investors, consumers, and markets merit better. Way better.”

Grewal’s comments bespeak a broader vexation wrong the crypto manufacture implicit what is perceived arsenic the SEC’s inconsistent and sometimes opaque regulatory approach. Furthermore, immoderate reason that this would unnecessarily hold the bankruptcy proceedings and prolong the fiscal hardship for creditors.

Meanwhile, the agency’s reservations regarding the usage of stablecoins successful creditor repayments item ongoing debates astir whether these integer assets should beryllium treated arsenic securities nether national law.

If the SEC were to situation FTX’s usage of stablecoins successfully, it could acceptable a precedent that impacts different companies and creditors progressive successful akin bankruptcy proceedings.

The station FTX bankruptcy faces caller hurdles arsenic SEC flags repayment concerns appeared archetypal connected CryptoSlate.