SEC warns FTX exchange against paying back creditors in stablecoins, digital assets


  • FTX’s plan to revive the offshore crypto exchange was shut down by CEO John Ray III and legal counsel. 
  • The bankrupt exchange is expected to pay back creditors in cash and US Dollar pegged stablecoins. 
  • SEC takes issue with crypto payments to FTX creditors, latest filing shows. 

A US court had ordered FTX exchange to pay $12.7 billion and compensate creditors, victims of fraud, nearly five months after founder Sam Bankman-Fried’s imprisonment. A recent court filing, dated August 30 shows that the Securities & Exchange Commission warned the bankrupt exchange of paying back creditors in kind, or in cryptocurrencies

The current plan is to pay creditors in cash and US Dollar-pegged stablecoins. 

SEC against crypto payments to FTX’s creditors 

The US financial regulator warned FTX exchange that it reserves the right to question the legality of claims paid using money from “crypto asset securities.” The SEC’s recent filing notes that FTX’s plan to pay users and fraud victims does not specify if the provision to make stablecoin payments is approved and who will distribute the tokens. 

SEC

SEC filing dated August 30

Why FTX went bankrupt 

In late 2022 during the crypto-market correction, FTX exchange imploded and went bankrupt. FTX founder Samuel Bankman-Fried faced imprisonment for 25 years and was convicted of fraud, conspiracy to launder money and ordered to forfeit $11 billion in assets. 

FTX exchange was worth $32 billion in 2022 and the exchange’s executives used customer funds for investments that would qualify as risky. In the lawsuit, prosecutors referred to the executives’ actions as “old-fashioned embezzlement,” disguised under new technology. 

The founder was held liable for taking $8 billion from users. 

Road ahead 

The SEC has reserved the right to comment on the legality of payments involving cryptocurrencies. Further, the regulator joined hands with the US Trustee overseeing the bankruptcy and objected to a discharge provision in the bankruptcy plan that would indemnify the FTX debtors from future legal actions by creditors. 

FTX’s bankruptcy fee surpassed $800 million per a report by TheBlock and as of May 2024, the exchange agreed to pay 98% of its creditors, including individual investors who held $50,000 or less with the exchange. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended Content

Editors’ Picks

Top 3 gainers Supra, Cosmos Hub, EOS: Supra leads recovery after Trump’s tariffs announcement

Top 3 gainers Supra, Cosmos Hub, EOS: Supra leads recovery after Trump’s tariffs announcement

Supra’s 25% surge on Friday calls attention to lesser-known cryptocurrencies as Bitcoin, Ethereum and XRP struggle. Cosmos Hub remains range-bound while bulls focus on a potential inverse head-and-shoulders pattern breakout.

More Cryptocurrencies News
Bitcoin Weekly Forecast: Tariff ‘Liberation Day’ sparks liquidation in crypto market

Bitcoin Weekly Forecast: Tariff ‘Liberation Day’ sparks liquidation in crypto market

Bitcoin price remains under selling pressure around $82,000 on Friday after failing to close above key resistance earlier this week. Donald Trump’s tariff announcement on Wednesday swept $200 billion from total crypto market capitalization and triggered a wave of liquidations.

More Bitcoin News
Can Maker break $1,450 hurdle as whales launch buying spree?

Can Maker break $1,450 hurdle as whales launch buying spree?

Maker is back above $1,300 on Friday after extending its lower leg to $1,231 the previous day. MKR’s rebound has erased the drawdown that followed United States President Donald Trump’s ‘Liberaton Day’ tariffs on Wednesday, which targeted 100 countries.

More Maker News
Gold shines in Q1 while Bitcoin stumbles

Gold shines in Q1 while Bitcoin stumbles

Gold gains nearly 20%, reaching a peak of $3,167, while Bitcoin nosedives nearly 12%, reaching a low of $76,606, in Q1 2025. In Q1, the World Gold ETF's net inflows totalled 155 tonnes, while the Bitcoin spot ETF showed a net inflow of near $1 billion.

More Bitcoin News
Bitcoin Weekly Forecast: Tariff ‘Liberation Day’ sparks liquidation in crypto market

Bitcoin Weekly Forecast: Tariff ‘Liberation Day’ sparks liquidation in crypto market

Bitcoin (BTC) price remains under selling pressure and trades near $84,000 when writing on Friday after a rejection from a key resistance level earlier this week.

Read full analysis
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

BTC

ETH

XRP