Lawrence Damilola
Coinbase’s Chief Legal Officer, Paul Grewal, has lambasted the U.S. SEC for its murky stance on the legality of crypto transactions tied to FTX’s bankruptcy.
Grewal, along with other crypto industry players, accused the Securities and Exchange Commission of regulatory ambiguity, particularly when it comes to creditor repayments involving stablecoins. In a Sunday X post, Grewal blasted the SEC for its “overreach” and “unreasonable threats” against FTX creditors.
“Why clarify the market when threats and aspersions will do? Investors, consumers, and markets deserve better. Way better,” the executive further commented. Grewal’s statements reflect ongoing frustrations in the crypto community about the perceived lack of clear guidance from the SEC on digital assets.
The SEC’s recent actions stem from its filing on Aug. 30 to the United States Bankruptcy Court in Delaware, indicating that it could challenge the legality of repayments to FTX creditors made with stablecoins.
While the SEC did not assert that such repayments are illegal under federal securities laws, it reserved its right to dispute transactions involving stablecoins, stating, “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.”
Following FTX’s collapse in Nov. 2022, the exchange has been working on methods to repay creditors, including a plan to reboot the exchange, which was later abandoned. The current plan proposes repaying creditors based on the US dollar value of their assets at the time of FTX’s bankruptcy, either in cash or stablecoins. However, the SEC’s stance has created uncertainty over the legal handling of these repayments.
Alex Thorn, head of research at Galaxy Digital, also criticized the SEC’s approach, calling it “the height of jurisdictional overreach.” Thorn noted that the SEC’s filing comes despite the regulator dropping its case against Paxos, the issuer of Binance USD (BUSD), in July. Thorn said, “The SEC doesn’t even make a case here. They are just unwilling to let it go.”
Beyond the repayment method, the SEC and the U.S. Trustee have raised concerns about a provision in FTX’s proposed bankruptcy plan that would shield the exchange from future legal actions by creditors. The U.S. Trustee has called for the court to reject the plan, arguing that it would unfairly limit creditors’ rights to pursue legal claims against FTX.
The filing also highlighted that the current plan does not specify a “distribution agent” responsible for managing the repayment process, whether in cash or stablecoins. The absence of this detail has added to the SEC’s concerns, signaling potential legal challenges ahead for FTX’s proposed repayment plan.
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Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
