In its latest filing, the U.S. Securities and Exchange Commission (SEC) has warned bankrupt crypto exchange FTX of repaying the victims in stablecoins or other crypto assets. Coinbase CLO Paul Grewal has slammed the US SEC stating that the regulator holds a keen interest in maintaining uncertainty over crypto rules.
US SEC Challenges FTX Repayment Plans
As part of the bankruptcy settlement for victims, crypto exchange FTX has been working on a repayment plan. Some creditors have also asked for in-kind distribution i.e. repaying back in crypto against the crypto holdings, instead of cash. Some bankrupt crypto lenders like Genesis and BlackFi have managed to pull this off successfully.
However, FTX has decided to repay the creditors in cash or USD-pegged stablecoins. But, the US SEC in its recent filing cautioned the exchange, stating that it reserves the right to contest the legality of repaying the claims or profiting from its holdings of “crypto-asset securities”.
Besides, the agency’s filing stresses that the plan lacks details on who would be responsible for distributing the stablecoins if the regulator approves this provision. While continuing to maintain the lack of clarity, the US SEC didn’t explicitly state that such a plan would be illegal. It noted:
“The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan,” while adding that the agency, “…reserves its rights to challenge transactions involving crypto assets.”
Along with the U.S. Trustee, the SEC has also objected to a discharge provision that would shield the FTX debtors from future legal actions by creditors. The U.S. Trustee has requested the court to deny the confirmation of the plan.
Coinbase CLO Slams the Regulatory Agency
Paul Grewal, the Chief Legal Officer of Coinbase, slammed the SEC for its recent stand on FTX’s bankruptcy plan. He also highlighted the agency’s refusal to clarify the legality of the transactions involved.
Commenting on the regulator’s stands claiming rights to reserve the crypto transactions, Grewal expressed frustration stating why the US SEC chose to issue threats instead of providing clear guidance. He emphasized that “Investors, consumers, and markets deserve better. Way better.”
The SEC didn’t outright state that such an action would be illegal, writing, “The SEC is not opining as to the legality, under thefederal securities laws, of the transactions outlined in the Plan,” but notes that the agency, “…reserves its rights to challenge transactions… https://t.co/zAMqY7mTcd
— paulgrewal.eth (@iampaulgrewal) September 1, 2024
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