Terminating DoCA's (Part 3) – Administrators' Casting Vote

Commissioner of State Revenue v McCabe (No. 2) [2024] FCA 662 ("McCabe")

IMO Academy Construction & Development Pty Limited [2024] NSWSC 808 ("Academy Construction")

Summary

Where there is a deadlock between the majority in value of creditors and those creditors with a majority in number on the vote for a DoCA, the administrator has a casting vote.

Terminating DoCA's (Part 2) – Unfair Prejudice or Injustice

Canstruct Pty Limited v Project Sea Dragon Pty Limited (No. 4) [2024] FCA 112 ("Canstruct")¹

Commissioner of State Revenue v McCabe (No. 2) [2024] FCA 662 ("McCabe")

Academy Construction & Development Pty Limited [2024] NSWSC 808 ("Academy Construction")

Deeds of Company Arrangement – Insured Claims

Destination Brisbane Consortium Integrated Resort Operations Pty Ltd as Trustee v PCA (Qld) Pty Ltd (subject to a Deed of Company Arrangement) [2024] QSC 178 ("Destination Brisbane")

In Destination Brisbane two questions, which concerned the entitlements of insured creditors under a DoCA, arose for consideration in the context of an application for judicial advice:

The bankruptcy court presiding over the FTX Trading bankruptcy last month issued a memorandum opinion addressing valuation of cryptocurrency-based claims and how to “calculate a reasonable discount to be applied to the Petition Date market price” for certain cryptocurrency tokens.

Who owns cryptocurrency held by a cryptocurrency exchange? Do the cryptocurrency assets belong to the customers who deposited the crypto with the exchange, or do the cryptocurrency assets belong to the exchange itself? The answer to this question will have huge significance, both in terms of creditor recoveries as well as preferential transfer liability exposure.

In this second part of our blog exploring the various issues courts need to address in applying the Bankruptcy Code to cryptocurrency, we expand upon our roadmap.

Many authorities and commentators have considered cryptocurrencies, and the blockchains that undergird them, as a potentially disruptive force in the financial industry. Now, that disruption has made its way to a different side of finance—bankruptcy, and during the past year, the United States bankruptcy courts have had to confront many unexpected challenges involved in dealing with cryptocurrency.

How close is too close? The answer to this question can have dire implications for people and companies involved in the cannabis industry who wish to seek bankruptcy protection.

Are bankruptcy doors now opening for cannabis companies? A decision last week from a California bankruptcy court indicates perhaps so, at least for cannabis companies that are no longer operating.

Factual Background

Last November we wrote about the Fifth Circuit Court of Appeals’ decision in Highland Capital Management, L.P., where the court reversed the bankruptcy court’s approval of a plan’s exculpation clause for non-debtors and limited the universe of parties covered by that provision. Relying on Bank of New York Trust Co., NA v. Official Unsecured Creditors’ Comm.