Coinspeaker
Coinbase’s Paul Grewal Critiques SEC’s Challenge to FTX Repayment Plan
Following a recent filing by the US SEC that challenges the collapsed crypto exchange FTX and aspects of its proposed repayment plan, Coinbase’s Chief Legal Officer Paul Grewal has kicked against the action made by the agency, accusing them of causing more confusion to the industry.
SEC has warned FTX not to repay creditors using stablecoins or other crypto assets, saying it has the right to challenge the legality of such transactions. The financial watchdog also opposed a part of the plan that would shield FTX from possible legal actions by creditors in the future.
Reacting to this, Paul Grewal cited the SEC’s statement and expressed his frustration with the regulator’s lack of clear guidance in its approach. He noted that the investors, consumers, and market deserve a much better system, suggesting that the SEC’s actions are harmful to the interests of the wider crypto community.
The SEC didn't outright state that such an action would be illegal, writing, "The SEC is not opining as to the legality, under the
federal 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
The SEC’s intervention comes as FTX has been working on several repayment plans to compensate its creditors. Some of the proposed plans include relaunching the FTX exchange to recover enough funds for creditors.
While the plan to relaunch was thrown aside as the company executive claimed no investor would be willing to invest money to revive the exchange, some creditors have requested in-kind distributions in the form of crypto assets. This approach has been successfully used by other bankrupt crypto companies, such as Genesis and BlackFi.
FTX has now decided to pay creditors in cash or US dollar-pegged stablecoins, of which it has been challenged by the SEC. The commission has not explicitly stated that the plan is illegal but reserves the right to challenge any cryptocurrency transaction. The agency also noted that the repayment plan fails to specify who would be responsible for the distribution should the provision be approved. SEC stated:
“In addition, the Debtors have not identified the distribution agent, which may potentially distribute stablecoins to creditors under the plan. The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the plan and reserves its rights to challenge transactions involving crypto assets.”
More Setbacks for FTX in Its Repayment Plan
The SEC’s objection to the discharge provision shielding FTX debtors from future legal actions has further compounded the issue. The SEC has teamed up with the US Trustee to ask the court to reject the plan, making the already complicated bankruptcy process even more difficult.
The recent filing by the SEC adds to the growing request for clearer regulations from the crypto community. A lack of clarity regarding the crypto industry could, in a way, create confusion and uncertainty in the market. While FTX is still seeking solutions to how it will conduct its repayment plan, this warning could be a knockback, resulting in them starting afresh, which could add to the frustrations of the creditors.
Coinbase’s Paul Grewal Critiques SEC’s Challenge to FTX Repayment Plan
