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.

'Avoidance action' is an umbrella term for any proceedings that seek to revoke illegitimate acts that diminish the debtor’s assets. These actions aim to protect creditors and maximise the value recovery from the debtor. Colombian law stipulates a variety of avoidance actions before and during insolvency proceedings, notwithstanding criminal liability for the revoked acts.

Before insolvency proceedings

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.

Pre-pack proceedings involve the negotiation for the sale of one or more productive units of a debtor company to a third party. This sale aims to satisfy the obligations of the creditors of said company by reaching an agreement on its value before the company formally files for insolvency proceedings.

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.

Whose crytpo is it? With the multiple cryptocurrency companies that have recently filed for bankruptcy (FTX, Voyager Digital, BlockFi), and more likely on the way, that simple sounding question is taking on huge significance. Last week, the Bankruptcy Court for the Southern District of New York (Chief Judge Martin Glenn) attempted to answer that question in the Celsius Network LLC bankruptcy case.