2023 may be remembered for the sheer number of cryptocurrency bankruptcies, but the biggest one that FTX creditors are trying to recover from is Over $8 billion It could go on for years with so many people and companies fighting over what’s left.
Alan R. Rosenberg, partner at Markowitz Ringel Trusty & Hartog, commented on the case: contaminated Last November, it would last longer than any other cryptocurrency bust: Celsius and BlockFi. That’s because FTX is litigating multiple clawback claims or avoidance actions to recover money paid in the weeks and months before its bankruptcy.
“Given that some of these transfers are probably very significant and some of them have been to large organizations that can defend themselves, it is very likely that some of these will persist for a long time,” Rosenberg said. In an interview with The Block, he said:
These claims are typically resolved through out-of-court settlements and do not go to trial because settlements are generally less expensive, Rosenberg added. However, settlement negotiations may take time.
FTX is struggling against huge sums while trying to recoup money lavished by its previous leadership. $24 billion The National Tax Service claims that the cryptocurrency exchange did not pay all taxes.
a flurry of lawsuits
FTX is already stable A mutually hostile complaint with Genesis, a major creditor of Alameda Research, a cryptocurrency company and FTX-affiliated trading firm that has not yet emerged from bankruptcy;
Similar complaints from FTX and Alameda, including lawsuits, remain unresolved. Compared to cryptocurrency exchange ByBit for 1 billion dollars. FTX is also working towards recovery $71 million As well as its own charity Paid to several celebrities Also for promotional purposes.
There are also ongoing lawsuits related to what the bankruptcy court determined were fraudulent transactions, and FTX is currently suing former CEO Sam Bankman-Fried, other former executives and Bankman-Fried’s parents.
Rosenberg added that there may be more such complaints in the future, some of which may be related to FTX investments and political donations. “Some people might not want to fight about it, but others probably will, and some people might not have the money anymore. And from what I understand, FTX has a lot of targets because they are pouring money all over the place,” Rosenberg said.
worth it
One of the key questions in these lawsuits is how to calculate the value of a cryptocurrency over time, Rosenberg said. “There is no clear case law that I am aware of regarding how the value of cryptocurrency is assessed in avoidance litigation.”
One precedent that could potentially be used is the 2014 bankruptcy of a cryptocurrency company. Hashfast“Rosenberg added.
“This was a classic cryptocurrency evasion problem, where you gave someone a certain amount of cryptocurrency prior to the date of the petition, and by the time you were sued, that same amount of cryptocurrency had become worth much more,” he continued.
Another painful question about cryptocurrency bankruptcy is how creditors should be paid in cryptocurrency or fiat, but there are no official rules on this. However, given the scale and scope of recent bankruptcies in the cryptocurrency industry and the adoption of cryptocurrencies in mainstream finance, Rosenberg expects new rules to come soon.
“I hope that this massive cryptocurrency bust and its aftermath will put in place a mechanism for legislators to at least determine what types of cryptocurrencies can be distributed,” the lawyer said.
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