The SEC has warned FTX that it may oppose the bankrupt exchange's plan to repay creditors using stablecoins or other digital assets. The agency also objects to provisions that would limit future legal liabilities for FTX's estate, aligning with the U.S. Trustee's concerns over discharge provisions that protect the debtors from further claims.

The FTX bankruptcy case highlights the issues with "dollarization" in crypto bankruptcies.

TrustToken and TrueCoin (one team) settled with the SEC over accusations of misrepresenting how their stablecoin (TrueUSD - TUSD) is backed and selling related securities without registration.

In a recent interview with CNBC's Squawk Box, SEC Chair Gary Gensler emphasized the urgent need for investor protections within the cryptocurrency industry. He warned that without these safeguards, the sector is unlikely to endure. Gensler pointed to the significant turmoil experienced in the crypto market over the past few years, highlighting the collapse of major firms such as FTX, Three Arrows Capital, and Celsius. He noted that many prominent figures in the industry have faced legal consequences, including FTX's Sam Bankman-Fried, who was sentenced to nearly 25 years in prison for fraud. Gensler's comments reflect a broader concern about the lack of trust and accountability in the crypto space, which has seen tens of billions of dollars lost due to bankruptcies and mismanagement. He stated, "What innovative field in America survives without having building trust in that field and protecting investors or consumers?" This underscores his belief that investor protection is essential for the sustainability and growth of the industry. While Gensler has classified most cryptocurrencies as securities, he reiterated that Bitcoin is an exception. He encouraged the registration of crypto platforms with the SEC to ensure compliance and transparency. Gensler also mentioned that investors can now express their views on Bitcoin through exchange-traded products, which provide a regulated avenue for investment. The discussion also touched on the political landscape, with Gensler being asked about the differing views on cryptocurrency from presidential candidates Vice President Kamala Harris and Donald Trump. Harris has expressed a commitment to fostering innovation in digital assets while ensuring consumer protection, whereas Trump has criticized regulatory actions against crypto and proposed his own crypto initiative. Gensler refrained from commenting on the political implications but maintained that investor protection is crucial for fostering innovation across all sectors. Overall, Gensler's remarks highlight the SEC's ongoing efforts to regulate the cryptocurrency market and the importance of establishing a framework that protects investors while allowing for innovation.

Former crypto exchange FTX has proposed a plan to see 98% of creditors receive 118% of their claims. Other non-governmental creditors would get 100% of claims plus up to 9% interest if the bankruptcy court approves the plan. The money was accrued by selling various FTX assets, like its stake in AI company Anthropic. FTX's lack of BTC and ETH holdings at the time of bankruptcy prevented it from seeing asset appreciation due to recently rising prices.

FTX has announced a significant decision regarding the allocation of proceeds from government forfeiture actions, setting aside up to $230 million specifically for certain shareholders rather than creditors. This move has sparked controversy, particularly among creditors who traditionally expect to be reimbursed before shareholders in bankruptcy proceedings. The agreement was finalized after the deadline for creditors to vote on the reorganization plan, and its revelation came as a surprise, leading to frustration and feelings of betrayal among creditors. The FTX estate, which is managing the bankruptcy process, argues that this reimbursement strategy is intended to prevent costly litigation and delays associated with the forfeiture proceeds. The plan stipulates that 18% of all proceeds from government forfeiture actions will be allocated to a special fund for the exclusive benefit of preferred shareholders, with the total amount capped at $230 million. This decision was made official on August 28, but creditors were not informed until September 27, which was the last day allowed for filing amendments to the plan. Critics, including representatives from creditor groups, have expressed their discontent, claiming that ordinary creditors had no opportunity to voice their opinions on this provision. Many creditors feel that they have been scammed again, as they had voted overwhelmingly in favor of the plan without knowledge of this new agreement. The FTX estate's filing suggests that both the debtors and preferred shareholders have a mutual interest in avoiding the costs and delays that could arise from litigation over the forfeiture proceeds. The FTX estate has estimated the total value of the forfeiture proceeds to be around $1.19 billion, which includes various assets such as cash, digital assets, and even private planes. The allocation of 18% of these proceeds aligns closely with the $230 million set aside for shareholders. Additionally, the plan allows for each shareholder to receive up to $250,000 for legal fees from the segregated fund. Despite the bankruptcy plan receiving preliminary support from creditors, there are concerns about the actual recovery amounts. Creditors are expected to receive at least 118% of their claim value in cash, but some representatives argue that the real recovery will be significantly lower when considering the value of cryptocurrencies at the time of bankruptcy compared to their current market value. The confirmation hearing for the FTX reorganization plan is scheduled for October 7, where a judge will decide on its approval. The estate is required to report the results of the creditor vote by September 30, which is also the deadline for filing any responses to objections regarding the plan. This situation highlights the complexities and tensions inherent in bankruptcy proceedings, particularly in the volatile cryptocurrency sector.

Galois Capital, a prominent advisory firm and Crypto Twitter presence, was fined $225,000 by the SEC for failing to comply with requirements related to the safeguarding of client assets. Certain assets were not held with a qualified custodian. Over half of the fund's assets were lost in the FTX collapse in 2022.

Tether CEO Paolo Ardoino is concerned about the EU's MiCA regulation for stablecoins. He asserts that the new requirements complicate stablecoin operations and increase their vulnerability and risk. In other news, Binance has announced plans to restrict "unauthorized" stablecoins in Europe to comply with MiCA, potentially affecting other exchanges and the accessibility of stablecoins like USDT.

The FTX Token (FTT), associated with the now-bankrupt cryptocurrency exchange FTX, experienced a significant surge of over 70% on September 29, 2024, reaching a price of approximately $2.70, the highest it had been since March 2024. This spike in value came amid speculation on social media regarding potential bankruptcy distributions to creditors and customers, which were rumored to begin on September 30. However, the official bankruptcy plan had not yet been approved, with a court hearing set for October 7 to discuss the plan's approval. Following the initial surge, the price of FTT fell back to around $2.10 by September 30, still reflecting a 30% increase over the previous 24 hours. If the bankruptcy plan is approved, it is expected that the FTX trustee will start making distributions to creditors with claims under $50,000 by the end of 2024, while those with larger claims may have to wait until early 2025 for any reimbursements. FTT was launched in 2019 alongside the FTX platform and provided various benefits to users, such as trading fee discounts and the ability to use the token as collateral for futures positions. The token reached an all-time high of nearly $80 in September 2021 but saw a dramatic decline following the collapse of FTX in November 2022, dropping from around $25 to below $2. This decline was exacerbated by Binance's decision to sell its entire holdings of FTT as a risk management measure. As of late September 2024, there are approximately 30,600 holders of FTT, with a market capitalization of around $330 million. A previous recommendation in July 2024 suggested removing FTT claims from the bankruptcy proceedings due to its equity-like characteristics, indicating the complexities surrounding the token's status in the ongoing bankruptcy process.

Despite mainstream media headlines suggesting FTX creditors will recover over 100% of their funds, the actual value users will receive is significantly less than what the assets could/would have been worth. Creditors will receive ~118% of their funds fixed to the fiat value of their assets on FTX's bankruptcy filing date. Many of the lost currencies (e.g., BTC, SOL, and ETH) have appreciated significantly since then.

Fintech companies Robinhood and Revolut are reportedly exploring the possibility of launching their own stablecoins, a move that aligns with recent regulatory developments in Europe aimed at enhancing the stability and transparency of the cryptocurrency market. This potential entry into the stablecoin sector comes as the market is increasingly dominated by Tether's USDT, which has a market capitalization exceeding $119 billion. Tether has experienced significant growth, particularly during periods of economic uncertainty and volatility in the cryptocurrency market. The company has reported record profits, amounting to $5.2 billion in the first half of 2024, and has bolstered its reserves with a substantial amount of U.S. government bonds. This success has attracted the attention of other companies looking to enter the stablecoin market, although neither Robinhood nor Revolut has officially confirmed their intentions. The regulatory landscape is shifting, particularly with the implementation of the European Union's Markets in Crypto-Assets (MiCA) regulation, which is set to transform how stablecoins are created, sold, and traded. The first phase of MiCA regulations, which focused on reserve requirements and transaction volume caps, took effect on June 30, 2024. A second phase, scheduled to begin on December 30, 2024, will extend these regulations to crypto-asset service providers, including exchanges and wallets. Under the new regulations, stablecoins, referred to as "asset-referenced tokens" or "electronic money tokens," will face strict controls, including daily transaction volume limits of $200 million for payment purposes. These changes are expected to reshape the stablecoin market, prompting companies to reassess their offerings and strategies in light of the evolving regulatory environment.

The SEC has filed a proposed amendment complaint against Binance, addressing issues previously dismissed by the court and emphasizing arguments about some cryptos being offered as unregistered securities. The new filing includes more detailed allegations about Binance's role in promoting digital assets, particularly BNB, SOL, ADA, and MATIC, and argues that Binance provides selective information to encourage investment. The SEC also moved away from “crypto asset securities” to emphasize that the associated contracts, not the asset itself, can constitute a security.

The SEC is seeking $2 billion in penalties from Ripple Labs. This is part of an ongoing conflict where the SEC accused Ripple of selling an unregistered security by raising $1.3 billion from the sale of XRP. Ripple's CEO critiqued the SEC's unjust behavior, citing court decisions in favor of Ripple.

The CFTC’s complaint against KuCoin for illegal commodity transactions and failing to register refers to both Bitcoin and Ethereum as commodities.

The SEC and ShapeShift have settled charges for operating an unregistered exchange and listing cryptocurrencies the SEC deemed securities.

Coinbase is suing the SEC and FDIC, using the Freedom of Information Act to demand the release of documents concerning past crypto investigations and regulatory actions. It claims these agencies have systematically hindered the crypto industry, which can be seen in the ongoing disputes over regulation and access to banking services for crypto firms.

The SEC is being sued over the recently finalized Dealer Rule expansion, which redefined the term to require more crypto organizations to register with the SEC and comply with securities laws. The lawsuit argues that the SEC did not address public concerns and failed to consider the expansion's negative consequences. The Blockchain Association and Crypto Freedom Alliance of Texas are advocate groups representing the industry and pushing for better crypto legislation.

The SEC has asked the court proceeding over its lawsuit against Coinbase to reject Coinbase's petition asking for a new regulatory system for crypto. In March, Coinbase claimed that the SEC does not have the authority to extend securities rulings to apply to crypto. The SEC sees its incremental application of existing regulations to crypto as reasonable and within its discretion.

SEC Chair Gary Gensler has criticized the Financial Innovation and Technology for the 21st Century Act (FIT21), arguing that it would create regulatory gaps and reduce the oversight of crypto assets as securities, thus jeopardizing investor protection.

The SEC has concluded its investigation into stablecoin issuer Paxos, officially determining that Binance's BUSD stablecoin is not a security.

Since the SEC allowed the ETH Futures ETFs to trade on its regulated security exchanges, it implicitly agreed ETH is a non-security and not under SEC jurisdiction. This move, made after Ethereum transitioned to a Proof of Stake model in 2022, suggests any delay or denial towards an ETH ETF would be contradictory to the agency’s past actions, as the SEC has indicated Ethereum is beyond its jurisdiction.

A US District Judge has ruled that the SEC’s securities lawsuit against Coinbase can proceed, despite the firm’s attempt at getting a dismissal. This decision implies that cryptocurrency transactions could fall under the SEC's jurisdiction, despite Coinbase's objections. The judge dismissed claims against Coinbase's Wallet product, stating the SEC has failed to prove that it acts as a 'broker'.

A lawsuit was filed against Coinbase by a few individuals in California and Florida alleging that Coinbase violated state securities laws with its digital asset sales. The lawsuit claims that SOL, MATIC, NEAR, MANA, ALGO, UNI, XTZ, and XLM as securities. Coinbase has previously argued that secondary crypto asset sales are not securities transactions.

The Securities and Exchange Commission (SEC) is appealing a recent ruling related to Ripple, a web3 payments firm, arguing that the decision conflicts with established Supreme Court precedent and securities law. An SEC spokesperson emphasized their belief that the district court's judgment undermines decades of legal standards, and they are eager to present their case to the Second Circuit Court of Appeals. Ripple's CEO, Brad Garlinghouse, responded to the SEC's appeal on social media, asserting that the SEC has failed to grasp the significance of the court's previous ruling, which he claims favored Ripple and the broader crypto industry. He stated that the legal status of XRP as a non-security is firmly established and remains unchanged despite the SEC's appeal, which he described as misguided and frustrating. In a prior ruling on August 7, 2023, a judge ordered Ripple to pay a civil penalty of $125 million, significantly less than the SEC's initial demand of $2 billion. The court's decision partially supported and partially rejected the SEC's motions regarding Ripple's sale of XRP. Earlier, on July 13, 2023, the same judge determined that while Ripple's programmatic sales of XRP did not violate securities laws, direct sales to institutional investors did qualify as securities transactions. The SEC's legal action against Ripple began in 2020, alleging that Ripple's sale of XRP constituted the sale of unregistered securities, claiming the firm raised over $1.3 billion through these sales. The ongoing legal battle highlights the complexities of cryptocurrency regulation and the evolving interpretation of securities laws in the context of digital assets. The article also notes that The Block, the publication reporting on this case, operates independently and is backed by Foresight Ventures, which invests in the crypto sector. The piece concludes with a disclaimer that the information provided is for informational purposes and not intended as legal or financial advice.

Though FIT21 is a momentous step forward for legitimizing the crypto industry, issues with its current form must be addressed in Senate negotiations. The bill's bifurcation of cryptocurrencies into “restricted digital assets” and “digital commodities” ignores tokens' global and fungible nature, leading to fragmentation and regulatory arbitrage. Lawmakers should refine the bill to unify spot markets for tokens that are not otherwise securities.

UniSwap was fined $175K by CFTC for providing access to illegal crypto derivatives trading.

The U.S. SEC has rejected Cboe BZX's filings for two Solana ETFs, following the SEC's stance that Solana qualifies as a security. Despite the setback, the issuers, 21Shares and VanEck, remain active on the SEC's filing system and may consider refiling with revisions arguing that Solana is not a security.

The SEC has terminated its investigation on the Stacks blockchain and parent company Hiro and will not pursue legal action. Stacks performed the first SEC-qualified token offering in 2019, initially classifying its token as securities before transitioning to a decentralized network.

The SEC's lack of clarity about what a security is and is not in the crypto industry has scared innovators away from releasing new protocols.

The SEC plans to amend its lawsuit against Binance, delaying the decision on whether cryptocurrencies like Solana (SOL), Cardano (ADA), and Polygon (MATIC) are considered securities. This move temporarily postpones a court ruling on these specific allegations but does not dismiss them outright.