The United States Securities and Exchange Commission (SEC) has expressed reservations regarding the repayment strategy proposed by the bankrupt crypto exchange FTX, indicating potential legal challenges if the plan involves the distribution of stablecoins to creditors. The SEC\u2019s concerns were documented in a filing with the United States Bankruptcy Court in Delaware dated August 30, which outlines the regulatory body\u2019s stance on the legality and oversight of crypto assets used in the repayment plan.<\/p>\n
FTX, once a leading figure in the cryptocurrency exchange market, filed for Chapter 11 bankruptcy in late 2022, following a rapid collapse that shook the crypto world. The filing on Wednesday reveals the SEC\u2019s hostile approach toward the distribution methods proposed in FTX\u2019s Chapter 11 Plan<\/a>, specifically the potential use of stablecoins\u2014cryptocurrencies designed to be pegged to a stable asset like the US dollar.<\/p>\n In the document<\/a>, the SEC does not explicitly deem such transactions as illegal but underscores its authority to challenge these transactions under US securities laws. The filing states:<\/p>\n \u201cThe Debtors\u2019 portfolio includes crypto asset securities which the Debtors may seek to monetize and\/or distribute pursuant to the Plan. And, the Debtors are exploring different distribution options, including potentially distributing stablecoins to certain creditors. The SEC is not opining as to the legality, under the federal securities laws<\/a>, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets.\u201d<\/p>\n Notably, the SEC has demanded that the Debtors remove the discharge provision from the Plan and the proposed confirmation order, in addition to requesting other specific amendments to both documents. The SEC has also made it clear that it holds the right to object to the approval of the Plan should these modifications not be implemented.<\/p>\n This stance comes despite the SEC recently dropping its enforcement actions against certain stablecoin operators, reflecting a inconsistent stance against cryptocurrencies. Industry experts have reacted to the SEC\u2019s position with strong criticism. Alex Thorn, head of research at Galaxy Digital, voiced<\/a> his dissent on X, questioning the SEC\u2019s consistent oversight claims over stablecoins.<\/p>\n