The Securities and Exchange Commission (SEC) has taken an interest in the restructuring plan of the now-collapsed FTX and revealed its intentions to challenge the crypto exchange’s payment plan to its creditors if they were paid in stablecoins.
“The SEC is not opining on the legality, under the federal securities laws, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets,” a motion filed by the SEC last Friday noted.
FTX’s Redistribution Plan
The regulator’s motion came after the collapsed crypto exchange floated a redistribution plan for its debtors.
FTX filed for bankruptcy in November 2022 with an $8 billion deficit. Although the exchange's condition looked grim when it filed for Chapter 11 protection, the bankruptcy administrators found a stash of digital currency holdings and other assets, gathering a substantial amount for repayment to the creditors.
Last May, FTX's bankruptcy administrators floated a restructuring plan to repay its creditors up to 118 percent of their claims in cash. However, only creditors with $50,000 or less in claims will be eligible, which is 98 percent of all creditors.
The non-governmental creditors would also receive their claims in full, along with 9 percent interest to be calculated from the date of the bankruptcy filing. According to the exchange, it will fulfil “the time value of their investments.”
Backlash from Creditors
However, that plan received backlash from a group of creditors who argued that it was not in their best interest. They even pointed out that any payment in fiat would attract tax liability.
Now, the SEC is pointing out that making payments using stablecoins might attract regulatory attention.
“The Debtors’ portfolio includes crypto asset securities, which the Debtors may seek to monetise and/or distribute pursuant to the Plan. And the Debtors are exploring different distribution options, including potentially distributing stablecoins to certain creditors,” the regulator added. “In addition, the Debtors have not identified the distribution agent, which may potentially distribute stablecoins to creditors under the Plan.”
Meanwhile, FTX settled the charges brought by the Commodity Futures Trading Commission earlier in July, paying $12.7 billion. Its founder and former CEO, Sam Bankman-Fried, also received a 25-year prison sentence.
This article was written by Arnab Shome at www.financemagnates.com.
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