NASSAU, BAHAMAS — The U.S. Securities and Exchange Commission (SEC) has filed an application indicating it may object to the FTX repayment plan unless certain modifications are made.
In its filing on August 30, the SEC indicated that it reserved the right to challenge the plan’s confirmation if these changes are not addressed.
The SEC’s intervention adds to the list of parties raising concerns about the plan, which has received approval from most FTX creditors. U.U.S.rustee Andrew Vara and a group of creditors had previously objected to various aspects of the proposal.
The SEC is calling for the removal of the discharge provision in the plan and the proposed confirmation order. This provision grants full immunity from liability to estate administrators and third-party advisors. U.U.S.rustee Vara and retail creditors had previously made similar objections, arguing that the plan’s broad exemptions exceed legal limits and provide excessive protection. While the SEC did not detail the reasons for its reservation of rights, it noted that it had asked the FTX bankruptcy administrator to delete this provision.
The SEC stated: “The SEC has requested that the Debtors delete the discharge provision from the plan and confirmation order and has also asked the Debtors to make certain other changes to the plan and confirmation order. The SEC reserves the right to object to confirmation of the plan if these changes are not made.”
Additionally, the SEC has reserved rights concerning the cryptocurrencies that the FTX bankruptcy estate has not yet liquidated or plans to distribute to creditors. While the FTX estate intends to distribute stablecoins to certain creditors, the SEC has reserved the right to challenge such distributions involving crypto assets.
The filing noted: “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 federal securities laws, of the transactions outlined in the plan and reserves its rights to challenge transactions involving crypto assets.”
FTX, the now-bankrupt former crypto trading platform, announced last month that its amended reorganization plan, filed with the United States Bankruptcy Court for the District of Delaware, had received substantial preliminary support from creditors, including FTX US and FTX.com customers. Unofficial voting reports indicate that over 95 percent of creditors who cast their votes supported the plan, representing 99 percent of the total value of voted claims.
FTX reported that more than two-thirds of all solicited claims by voting value participated in the solicitation process. The company believes this level of support will help the plan meet the required acceptance thresholds under U.U.S.ankruptcy law. Final voting results will be submitted to the court before the confirmation hearing scheduled for October 7, 2024. John Ray III, FTX’s Chief Restructuring Officer and CEO highlighted the strong voting participation as a sign of support for the reorganization plan. He stated, “Importantly, the Plan’s innovative structure provides for the return of 100 percent of bankruptcy claim amounts plus interest for non-governmental creditors and resolves complex disputes with dozens of governmental and private stakeholders.”
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