Crypto firm bankruptcies and resulting disruption in the crypto ecosystem will continue to exacerbate liquidity and regulatory concerns in this space. Signs of contagion are evident as prices of almost every cryptocurrency type have halved in recent months. Since all participants supporting the crypto ecosystem are at risk, managing that risk is critical.
Fund managers should be prepared on multiple fronts, as the following examples illustrate:
Everything, everywhere, all at once is our risk thesis for 2023, but one must not forget about concentration risk. This issue has rocketed up diligence agendas for LPs and GPs alike as the collapse of Silicon Valley Bank proved it really was the bank for venture capital.The entry of SVB into receivership on March 10, 2023 highlighted just how central it had become to U.S.
In Bailey & Others (Joint Liquidators of D&D Wines International Limited) v Angove’s Pty Limited1, the Court of Appeal overturned a decision of the High Court, and so permitted the liquidator of an insolvent agent to recover funds due to it from end-customers despite the agency having been terminated.
Background
The global crisis and the rights of foreign creditors of Sovereign States
The global financial crisis has been well documented in the press, with one recent headline in The Times reading “Like Iceland, Ireland can refuse to pay up”. Claims that States face bankruptcy not unnaturally raise the alarm bells for the financial markets. Can States be sued if they default in payment? RPC recently enforced a claim against assets of an EU State, as discussed below...
Bankrupt States: A misnomer