As a seasoned crypto investor with over two decades of experience navigating the volatile and ever-evolving digital asset market, I find myself increasingly frustrated by the SEC’s ongoing approach to crypto bankruptcies, particularly the recent developments surrounding FTX. The parallels between their handling of Voyager’s bankruptcy and the current situation are not only alarming but also indicative of a regulator that seems more interested in creating uncertainty than providing clarity.
1. Critics are voicing disapproval towards the Securities and Exchange Commission regarding their latest filing concerning the FTX bankruptcy, mirroring their questionable handling of the Voyager situation.
More recently, the SEC has indicated to the FTX estate that they might challenge proposals for reimbursing creditors using stablecoins or other digital currencies, due to possible legal complications.
As a crypto investor, I understand that the Securities and Exchange Commission (SEC) might question FTX’s proposed method of repaying creditors with cash or U.S. dollar-backed stablecoins, even though they have expressed concerns about a clause designed to shield FTX from future legal responsibilities.
On September 2nd, attorney and strategic consultant James Murphy expressed his thoughts regarding the Voyager bankruptcy in 2022 and the Securities and Exchange Commission’s (SEC) tendency to be unclear about cryptocurrency transactions. Critics claim that this lack of clarity slows down the bankruptcy process.
The SEC employed the same concealment strategy during Voyager’s bankruptcy proceedings, which was rightly dismissed by the presiding judge as follows:
— MetaLawMan (@MetaLawMan) September 2, 2024
If financial difficulties arose for Voyager, they chose to file for Chapter 11 bankruptcy protection in July of 2022. This was primarily because their main creditor, Three Arrows Capital, had fallen into insolvency.
1. During Voyager’s proposal to reimburse clients with stablecoins, the SEC took a keen interest and raised worries that such repayments might be deemed unregistered securities. This added complexity to their bankruptcy proceedings, leading to hold-ups and legal disputes.
In this situation, the judge expressed criticism towards the Securities and Exchange Commission (SEC) over their ambiguous criticisms regarding stablecoins, as reported by Murphy, emphasizing that regulatory bodies should explicitly express their issues or concerns if they exist.
Latest SEC FTX filing
In simpler terms, the SEC’s recent filing regarding the FTX case indicates that they might contest the validity of returning debts using stablecoins or other digital currencies once more. Yet, it’s important to note that they have not explicitly labeled such actions as illegal; instead, they reserve the option to object in future instances.
The consistent ambiguity in this matter has attracted criticism from analysts within the industry, who feel that it weakens the Securities and Exchange Commission’s goal of safeguarding investors.
The Securities and Exchange Commission (SEC) didn’t explicitly declare such actions as illegal, instead stating, “The SEC does not express a view on the legality, under federal securities laws, of the transactions detailed in the Plan.” However, they made it clear that they retain the ability to contest these transactions.
— paulgrewal.eth (@iampaulgrewal) September 1, 2024
Paul Grewal, Coinbase’s Chief Legal Officer, expressed on Twitter that “Investors, customers, and marketplaces need a significant improvement – way more than they’re currently getting,” as a reaction to the perceived lack of transparency.
Some people contend that the SEC’s methodology increases complexity in an already convoluted bankruptcy procedure, causing others to wonder if this tactic genuinely benefits investors or merely extends the duration of the bankruptcy proceedings.
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2024-09-02 20:00