The U.S. Securities and Exchange Commission (SEC) hinted that it might be against issuing refunds in cryptocurrency to users of the defunct crypto exchange FTX in a recent filing.
FTX, which was once one of the largest crypto exchanges in the world, filed for bankruptcy in November 2022 after it was discovered that its founder and CEO, Sam Bankman-Fried, used customers’ funds for risky bets and personal expenses. As part of the bankruptcy process, FTX said it will repay around $16.3 billion to its users while floating the idea of issuing refunds in cash and stablecoins.
Stablecoins are crypto assets that have their value tied to an outside commodity. In most cases, it is a currency like the US dollar or an asset like gold.
After learning about FTX’s plans, the SEC expressed its doubts by saying that it “is not opining as to the legality, under the federal securities law, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets.”
Additionally, the SEC asked for FTX’s bankruptcy plan to be amended and have its discharge provision removed. Discharge provision protects debtors from being sued again for the same cause.
“Unless the Plan provides that the Debtors shall not receive a discharge and removes any discharge injunction, the Court should deny confirmation,” the filing adds.