FTX Creditor Wants Debt Repayment In Crypto Instead of USD

7Ary...USep

9 May 2024

FTX creditor said Sullivan and Cromwell - S&C/Debtors are indebted to FTX customers for the current value of their holdings, which is 3-10x the petition prices.

HIGHLIGHTS

FTX creditor said that current value of FTX holdings is 3 to 10 times of what they owe to customers.
He blames Sullivan and Cromwell for causing over $10 billion loss to creditors.
FTX creditor demands customers should get the current value of their holdings.

In a pathbreaking decision, bankrupt crypto exchange FTX announced that it would repay all of its creditors and customers with interest while disclosing its proposed distribution plan in a latest document. While many in the crypto community appreciated this development, FTX creditors aren’t much happy about this.

FTX Creditor Representative Rejects Compensation Plan

Sunil Kavuri, the FTX creditor representative, opposed the proposed compensation plan. He advocated for debts to be settled in cryptocurrency rather than their dollar equivalent at the point of bankruptcy.
In a recent development, Sunil, a key figure in the ongoing FTX saga, urged stakeholders to vote against the proposed plan. Sunil’s stance highlights several critical concerns surrounding the current situation:

Sullivan and Cromwell – S&C/Debtors are indebted to FTX customers for the current value of their holdings, which stands at 3 to 10 times the petition prices.
It’s alleged that S&C has caused substantial damage, estimated to exceed $10 billion, to FTX creditors.
SBF, the founder of FTX, reportedly faced a 25-year sentence for violating terms of service (TOS) and allegedly misappropriating customer deposits.
S&C is implicated in ongoing class-action lawsuits, accused of aiding and abetting SBF’s fraudulent activities.

FTX announced its plan to allocate the additional billions in cash reserves towards paying interest to its 2 million customers, a relatively uncommon outcome compared to typical bankruptcy settlements where creditors often receive minimal compensation.
Upon liquidating all assets, the exchange anticipates having approximately $16.3 billion in cash reserves for distribution, according to a company statement. The outstanding debts, amounting to roughly $11 billion, are owed to customers and other non-governmental creditors.

Grayscale CEO Says Spot Ethereum ETF Still On The Cards

Gryascale CEO said that he's uncertain on SEC's stance on Ethereum ETF but added that the regulator would see investors interest.

HIGHLIGHTS

Grayscale withdrew futures Ethereum ETF since there are many products already in the market.
Grayscale CEO shows optimism that the SEC will prioritize investors' interests.
Grayscale will work on converting ETHE into a spot Ethereum ETF.

A day after Grayscale withdrew its application for the Ethereum Futures ETF, CEO Michael Sonnenshien stated they had not given up yet. He stated that Grayscale will continue to focus on converting its Ethereum Trust (ETHE) into a spot Ethereum ETF. This is the same path they undertook while converting their Bitcoin Trust GBTC into a spot Bitcoin ETF.

Grayscale And Its Spot Ethereum ETF Ambitions

Speaking at the event hosted by the Financial Times on Wednesday, Sonnenshein said: “At Grayscale we decided to focus our energy on our spot products. That’s really core to our DNA”.
Commenting on the withdrawal of the Ethereum futures ETF application, the Grayscale CEO stated that they did so since there are several futures products already available in the market today.
VanEck’s EFUT and ProShares’ EETH emerge as dominant players in the fiercely competitive futures Ethereum ETF market, collectively commanding more than 90% of the total trading volume. “Sometimes we will file for a product. That doesn’t necessarily mean it’s going to come to market,” Sonnenshein said.
Grayscale along with other top financial giants like VanEck, Blackrock, Fidelity, and Ark Invest, have applied with the SEC to bring a spot Ethereum ETF in the market. However, just two days ago, the SEC delayed its decision on the Invesco Galaxy Ethereum ETF to July.
Crypto market enthusiasts have been eagerly awaiting the launch of spot Ethereum ETF, with the first deadline approaching closer on May 23. However, market analysts haven’t been bullish on SEC’s approval due to the fact that Ethereum’s ‘security’ status remains unclear.

Grayscale Mini Trust

Grayscale has submitted paperwork to introduce a mini trust, which constitutes a smaller fund initially funded with assets from its larger trust. Craig Salm, Grayscale’s chief legal officer, emphasized that the Grayscale Ethereum Mini Trust is designed to supplement the firm’s existing line of Ethereum-based products, catering to various investor needs.
During discussions on Wednesday, Sonnenshein expressed uncertainty about the SEC’s stance on Ethereum. However, he conveyed Grayscale’s optimism that the SEC will prioritize investor interests. He added:
“Grayscale Ethereum Trust is already an SEC reporting company. We file 10-Ks and 10-Qs [disclosures to the SEC], and we’ve always been a business that pushes our regulators to allow crypto to be brought further and further into the regulatory perimeter.”

Breaking: US House Passes Vote to Overturn SEC Crypto Accounting Rule

US House votes to overturn with a pass of 228 votes SEC crypto rule, gaining bipartisan support with potential White House veto looming.

HIGHLIGHTS

The US House of Representatives passed a resolution to overturn an SEC bulletin that affects cryptocurrency custodians.
The resolution received bipartisan support with 228 votes in favor, including 21 Democrats.
Critics argue that the SEC's rules make it difficult for banks to safely handle digital assets.

The US House of Representatives passed a resolution aiming to overturn a Securities and Exchange Commission (SEC) bulletin on accounting standards for cryptocurrency custodians. The measure, passed by a vote of 228-182, saw significant support from Republicans and backing from 21 Democrats. This move reflects growing tensions between legislative preferences and regulatory measures concerning the digital asset industry.

US House Debates SEC Rule on Crypto Custody

The controversial SEC bulletin, originally issued in 2022, mandates that firms holding cryptocurrencies on behalf of customers must include these holdings as liabilities on their balance sheets. This requirement has sparked debate, with opponents arguing that it makes it excessively burdensome for financial institutions to safeguard digital assets.
The House debate showcased a rare bipartisan approach to an issue that typically polarizes opinion along party lines. House Financial Services Committee Chair Patrick McHenry, a Republican, criticized the SEC’s bulletin for imposing heavy capital and liquidity requirements on banks. According to McHenry, these requirements effectively prohibit financial institutions from handling customers’ digital assets.
On the other side of the aisle, Representative Maxine Waters, a Democrat and the committee’s leading member, defended the SEC’s stance. She argued that the regulation aids in providing transparency and could help prevent the type of fraud that has been seen in the collapse of major crypto firms. Waters also highlighted concerns that overturning the bulletin could restrict the SEC’s ability to issue similar future guidance, potentially undermining regulatory efforts to oversee the burgeoning crypto market.

White House Opposes SEC Crypto Changes

The measure’s future is uncertain as it moves to the Senate, where it must pass through the Senate Banking Committee before a full Senate vote. The White House has already expressed opposition, with a statement indicating that President Joe Biden would veto the resolution. The administration argues that curbing the SEC’s regulatory power would introduce significant financial instability and market uncertainty, an undesirable outcome amid the volatile nature of crypto markets.
The resolution found an ally in Senator Cynthia Lummis, a Republican, who introduced a companion measure in the Senate. The digital commerce community is closely watching the developments, with Cody Carbone, vice president of policy for the Chamber of Digital Commerce, expressing optimism about the measure’s passage due to its focus on consumer protection and regulatory process rather than solely on cryptocurrency.
The potential reversal of the SEC bulletin has broader implications for the regulation of digital assets. Industry stakeholders are concerned about the role of traditional banks in the cryptocurrency space and the extent of regulatory oversight deemed appropriate. The resolution’s proponents argue that the SEC’s requirements are too stringent and stifle innovation and participation in the digital economy.
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