FTX Claim Update: Hearing scheduled for 10/7, SEC may oppose returning assets in stablecoins

FTX's bankruptcy plan has ended the voting on 8/16 with overwhelming support. A hearing will be held on 10/7, symbolizing a significant step forward for creditors seeking compensation. However, according to a recent filing by the U.S. Securities and Exchange Commission (SEC), the agency may oppose any attempts to repay creditors with stablecoins or other digital assets.

Votes Overwhelmingly in Favor, Hearing Scheduled for 10/7

According to a press release from FTX, over 95% of creditors who submitted votes supported the reorganization plan, representing 99% of the voting claims by value.

John J. Ray III, CEO of FTX, stated:

The strong voter turnout and corresponding results underscore the broad support and consensus for the FTX reorganization plan. We will continue to work constructively with our creditors and the court to distribute cash to customers and complete the Chapter 11 process.

FTX will submit the final voting results to the United States Bankruptcy Court for the District of Delaware before the confirmation hearing scheduled to begin on October 7, 2024.

Previous reports indicated that the FTX liquidators in the Bahamas anticipate creditors receiving between 119 and 143 cents on the dollar.

SEC: Likely to Oppose Distribution in Stablecoins

While CEO John Ray III and FTX, led by legal advisors Sullivan & Cromwell, have rejected the idea of restarting the exchange, citing a lack of investor interest in providing the necessary funding for reviving the offshore exchange, and creditors have also been informed they will not be able to retrieve their crypto assets as in the case of Mt. Gox, there are reports that FTX may potentially return assets to creditors in the form of stablecoins.

However, according to a recent filing by the U.S. Securities and Exchange Commission (SEC), the agency may oppose any attempts to repay creditors in stablecoins or other digital assets. The SEC pointed out that FTX's plan fails to specify who would distribute the stablecoins if the provision is approved.

The filing mentions that under the reorganization plan submitted by FTX, Case No. 22165, page 12, the defined "cash" includes stablecoins pegged to the U.S. dollar. However, FTX has yet to determine a distribution agent, which may distribute stablecoins to creditors based on the plan.

The SEC has not voiced an opinion on the legality of the transactions outlined in the plan but will reserve the right to question transactions involving crypto assets.