Thursday, September 18, 2025

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SEC Raises Red Flags as FTX Tries to Repay Creditors with Crypto

In the ongoing saga of FTX’s bankruptcy, the beleaguered cryptocurrency exchange faces fresh legal challenges as it attempts to repay creditors. The latest issue centers on FTX’s plan to use stablecoins—cryptocurrencies pegged to the U.S. dollar—to fulfill its obligations.

This plan has attracted scrutiny from the U.S. Securities and Exchange Commission, which recently cautioned the exchange against using digital assets to settle debts, further complicating an already convoluted bankruptcy process.

On August 31, 2024, a stakeholder update revealed that FTX holds $3.4 billion in digital assets, including $120 million in Tether (USDT), a widely-used stablecoin. This sum, though seemingly substantial, is overshadowed by the scale of the claims against FTX. The SEC has signaled its intention to potentially challenge the legality of repaying creditors with these assets, particularly given the ambiguity surrounding the distribution mechanism for such stablecoins.

“The SEC is not opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan,” the filing stated, but it added, “…reserves its rights to challenge transactions involving crypto assets.”

This regulatory uncertainty also extends to Tether, the issuer of USDT. Tether’s financial stability has been a topic of debate within the crypto community, especially given concerns about whether its reserves can fully back the circulating USDT supply. A recent comment from a cryptocurrency analyst highlighted this tension, noting that the $120 million in Tether held by FTX is more than the $110 million Tether claimed to have in bank reserves as of June 30, 2024.

The comment from the analyst, @Cryptadamist on X (formerly known as Twitter), speculated, “I guess this means Tether is going to have to come up with $120 million in cash for the #FTX estate?”

FTX’s financial situation remains dire. The bankruptcy proceedings have revealed a complex web of assets and liabilities, with the exchange’s remaining assets far below the amounts owed to creditors.

A recent update from the United States Bankruptcy Court provided a detailed breakdown of FTX’s holdings, including $80.9 billion in U.S. Treasury Bills, $109.8 million in cash and bank deposits, and over $4.7 billion in Bitcoin. Despite these assets, the overall financial picture remains grim, especially when considering the administrative costs, which have ballooned to over $800 million.

FTX’s management, led by CEO John Ray III and legal counsel Sullivan & Cromwell, has been exploring various options to maximize creditor recovery. These have included relaunching the FTX exchange or distributing claims as tokens in new ventures, although both options have faced significant obstacles.

Recently, FTX dismissed the possibility of restarting the exchange, citing a lack of investor interest.


Information for this briefing was found via The Block and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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