SEC Warns FTX Against Paying Creditors Back in Stablecoins, Other Crypto

The FTX bankruptcy has led to various recovery proposals, including restarting the exchange or issuing new tokens to represent creditor claims. This summer decentralized platforms such as Found.xyz and Figure Markets were soon enabling the trade of these tokenized claims, which one crypto CEO described as one of the most crypto things.

However, FTX’s CEO John Ray III and the Sullivan & Cromwell legal team have rejected the idea of relaunching the exchange. They claim that the process of investor attraction would be too complicated in this case. Further, FTX intends to utilize cash or stablecoins that are linked to the U. S. dollar to pay its creditors, not cryptocurrencies.

Recently, the Securities and Exchange Commission (SEC) warned about this plan. The SEC stated that it may seek to question the lawfulness of employing crypto assets for the repayment and expressed that the plan fails to clear how the issuance of the stablecoins will be managed. While the SEC has not categorically stated that the plan is unlawful, it has retained the right to challenge transactions in crypto assets.

FTX Bankruptcy Faces New Hurdles with Rising Costs and Trustee Objections

The U. S. Trustee who oversees the bankruptcy has raised a concern with one of the terms that seeks to shield FTX’s debtors from subsequent lawsuits. The Trustee claims that if a plan does not state that the debtors will not receive such protections it should not be approved.

Administrative expenses of the FTX bankruptcy have skyrocketed and recently, FTX staff have been charging over $800 million, as reported by an X user named Mr. Purple.

Lastly, one can note that the FTX bankruptcy still exhibits significant issues. There are numerous proposals as to how funds are to be recovered, but various issues arising from regulatory bodies and continuously increasing administrative costs complicate it. These challenges will become apparent as the situation unfolds and institutional stakeholders will need to avoid them to reach a fair solution.

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