SEC 'Reserves' Right To Oppose Bankrupt Crypto Exchange FTX's Plan To Pay Creditors In Stablecoins
The U.S. Securities and Exchange Commission (SEC) may oppose the plan proposed by bankrupt cryptocurrency exchange FTX to repay creditors using U.S. dollar-pegged stablecoins.
What Happened: In a court document, the regulator stated it reserves its rights to object to the transactions detailed in FTX’s liquidation plan, Decrypt reported Monday. The SEC clarified that it “is not opining as to the legality, under the federal securities laws, of the transactions” but may challenge transactions involving cryptocurrency assets.
The SEC pointed out that the administrators for the FTX estate have not identified the distribution agent, which may potentially distribute stablecoins to creditors under the plan.
See Also: Elon Musk Cleared Of Dogecoin Market Manipulation Charges
The approved restructuring plan would have allowed debtors to receive up to 118% of their claims in cash, but only those claiming less than $50,000 would have been eligible for the repayments.
Why It Matters: The development came after the cryptocurrency exchange, which went bust in November 2022, agreed on a plan to repay its creditors between $14.5 billion and $16.3 billion in total compensation, about $5.3 billion more than what was owed.
This was a rare outcome in U.S. bankruptcies where creditors typically receive only a fraction of their claims. The majority of customers are expected to receive 118% of their claims in cash.
Sam Bankman-Fried, the exchange’s founder, was sentenced to 25 years in prison after being convicted of defrauding customers, investors, and lenders in March. The company had to liquidate his $222 million worth of real estate to compensate creditors.
Price Action: As of this writing, FTX Token (CRYPTO: FTT) tied to the exchange was trading at $1.29, up 5% in the last 24 hours, according to data from Benzinga Pro.
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