How did we get here?

The crypto markets were rocked again last week by the collapse and bankruptcy of FTX and Alameda Research. Within a few short days, Sam Bankman-Fried (SBF) and his companies went from a stabilizing force for markets and acting as an industry leader to causing one of the greatest disruptions in digital asset market history.

The recent crash in cryptocurrency prices has erased nearly $2 trillion in market value and forced three large firms into bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York (SDNY): Three Arrows Capital, Voyager Digital, and Celsius Network.

The cryptocurrency hedge fund Three Arrows Capital was the first domino to fall. It suffered heavy losses on trades connected to the collapse of the Terra algorithmic stablecoin, which in turn triggered margin calls and subsequent defaults on over $1 billion in loans.

Cancellation of debt a key element of most restructurings generally triggers taxable income. The German tax authorities had issued an administrative decree (the "Tax Restructuring Decree" - Sanierungserlass), however, declaring that, upon the satisfaction of certain requirements and conditioned on forfeiture of any loss carry forwards, the cancellation of debt income ("CODI") would not be taxed.