The SEC wants changes to FTX’s bankruptcy plan

Bankrupt FTX's reorganization plan has hit another hurdle, with the US Securities and Exchange Commission (SEC) reserving its right to challenge it.

The development follows claims that the exchange's recent reorganization plan has received substantial early support from creditors.

SEC objections to FTX's reorganization plan

In the year In an Aug. 30 court filing, the SEC expressed its concerns that it may challenge the plan's certification if specific changes are not made. Specifically, the SEC requested that the waiver provision be removed from the plan and confirmation order along with the other amendments.

“The SEC has requested the Borrowers to remove the waiver provision from the Plan and the Confirmation Order and has requested that the Borrowers make certain changes to the Plan and the Confirmation Order. If these changes are not made, the SEC reserves the right to reject the plan's confirmation,” the SEC wrote.

The request reflects concerns raised by Andrew R. Vara, the US trustee overseeing FTX's bankruptcy case. Vara argued that the scheme provides excessive legal protection to asset managers and advisers beyond what is common under relevant laws. He emphasized that such immunity is not necessary for the hiring and compensation of court-approved professionals.

Read more: FTX Collapse Explained: How the Sam Bankman-Fried Empire Fell

In addition, the SEC has rights regarding crypto asset securities that FTX may liquidate or distribute to creditors. While the SEC has not clarified whether these transactions are compliant with federal securities laws, it has left the door open to objecting to transactions involving crypto assets.

Indeed, this move coincides with the SEC's broader stance under Gary Gensler, which has classified several crypto assets as securities. Specifically, the Gensler-led commission identified more than 20 crypto tokens, including Solana and Polygon, as collateral in major lawsuits against companies such as Coinbase and Binance.

“Of course the SEC protects rights related to ‘crypto asset securities', a meaningless term given the SEC's utter lack of regulatory transparency. They reserve the right to try to block Stablecoin distributions. This may be a legal post but it's still outrageous,” Mr. Purple wrote.

Read more: Who is FTX's new CEO, John J. Ray III?

Meanwhile, financial attorney Scott Johnson commented on the SEC filing. According to him, the SEC's withholding of rights regarding the distribution of FTX's asset cash in USD stablecoins reflects the emerging industry's “constant stonewalling.”

Our good friends at the SEC to oppose the distribution of the FTX asset “cash” in the form of USD stablecoins. Borrowers requested to withdraw the offer. I don't read too much into it, but the constant stone-throwing is indicative,” he said.