SEC warns FTX not to pay creditors in stablecoins and other cryptocurrencies
Throughout the FTX bankruptcy, many different avenues have been explored or proposed to maximize creditor recovery, from relaunching the FTX exchange to recover money for creditors to distributing claims as tokens in a new, tradable company.
Some decentralized marketplaces like Found.xyz and Figure Markets even launched support for trading tokenized FTX claims this summer, in a move one crypto CEO called “one of the most crypto-friendly things” he’s ever seen.
However, FTX, led by CEO John Ray III and legal counsel Sullivan & Cromwell, rejected the idea of restarting the exchange, claiming that no investors would put up the capital needed to get the offshore exchange up and running again.
While some creditors have called for in-kind distributions — that is, repaying lost cryptocurrencies in cryptocurrency rather than cash as in the BlockFi and Genesis bankruptcies — FTX’s current plan is to pay creditors in cash or stablecoins pegged to the U.S. dollar.
Now, in a recent filing, the Securities and Exchange Commission warned FTX that it reserves the right to challenge the legality of paying claims or otherwise attempting to make money off its stash of “cryptoasset securities.” The SEC filing also notes that the plan does not specify who would distribute the stablecoins, should that provision be approved.
The SEC did not directly state that such an action would be illegal, writing, “The SEC does not opine on the legality, under federal securities laws, of the transactions described in the Plan,” but notes that the agency “…reserves the right to challenge transactions involving cryptoassets.”
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