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.
The European Markets in Crypto-Assets Regulation (Regulation (EU) 2023/1114 – MiCA), which entered into force on 29 June 2023, is a significant new regulation that will impact the treatment of cryptocurrencies and digital assets. MiCA requires the European Securities and Markets Authority (ESMA) to develop a series of regulatory technical standards (RTS) and implement technical standards (ITS) and Guidelines. Many of these regulations are to be developed in close cooperation with the European Banking Association (EBA).
On June 27, 2022, Three Arrows Capital (“3AC”), a crypto hedge fund, commenced liquidation proceedings in the British Virgin Islands and thereafter filed recognition proceedings in, among other countries, the United States and Singapore.
On May 8, 2023, online cryptocurrency exchange platform Bittrex, Inc. and three of its affiliated entities (collectively “Bittrex”) filed for chapter 11 to wind down their U.S. and long-dormant Malta operations. The bankruptcy filing followed costly regulatory investigations and an April 17, 2023 SEC enforcement action alleging that Bittrex improperly sold crypto assets that were securities. Unlike other crypto bankruptcies, Bittrex did not risk, hypothecate, or loan cryptocurrencies needed to meet its contractual obligations to its customers.
When a court-appointed trustee or liquidator is tasked with liquidating an entity, they need to gain possession of all of the entity’s assets. In crypto cases, this task can prove difficult when trying to identify and control all of the entity’s different digital assets and obtain cooperation from the entity’s former operators. Unfortunately, in the case of Three Arrows Capital (“3AC”), the two founders have refused to cooperate with recovery efforts and have absconded to unknown foreign countries.
In a recent litigation and appeal involving claims under the Fair Credit Reporting Act (“FCRA”), the Ninth Circuit affirmed the district court’s grant of summary judgment to the defendant, in a win for CRAs named in similar litigation. Leoni v. Experian Info. Solutions, 2021 U.S. App. LEXIS 17687 (9th Cir. June 14. 2021). Read on for details about the case and its implications.
Last year the Corporate Insolvency and Governance Act (the Act) made both temporary and permanent changes to the UK insolvency laws.
As part of these measures, a provision was inserted into existing legislation which curtails the ability of suppliers to terminate supply contracts when a customer becomes insolvent (the so called `ipso facto regime').