Colorado just became the latest state to recognize that a borrower’s bankruptcy discharge does not accelerate secured installment debt or trigger the final statute of limitations period to recover the debt.
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.
The Lac du Flambeau Band of Lake Superior Chippewa Indians (Lac du Flambeau Band) found support from law professors specializing in federal Indian law as well as an assemblage of tribes and Native American groups in its bid before the U.S. Supreme Court to assert sovereign immunity from suit regarding alleged violations of the automatic stay. While they acknowledge that tribal immunity may be abrogated, they insist Congress must do so expressly and unequivocally.
In a unanimous decision, the Supreme Court held that § 523(a)(2)(A) of the Bankruptcy Code precludes a debtor from discharging a debt obtained by fraud, regardless of the debtor’s own culpability. In Bartenwerfer v. Buckley, issued February 22, the Court concluded that “§ 523(a)(2)(A) turns on how the money was obtained, not who committed fraud to obtain it.”
On January 19, the United States Bankruptcy Court for the Western District of Virginia entered an order sanctioning a collections law firm for violating the bankruptcy discharge injunction. The court in Skaggs v. Gooch (In re Skaggs) awarded the debtor $25,000 in attorneys’ fees based on a letter he received concerning a discharged debt.
Demand for virtual currency services, including custody services, has soared in the past several years. Like their counterparts in traditional finance, these custodians are stewards of retail and institutional customer funds and serve an important and valuable function. However, as evidenced by a number of headline-grabbing failures during the lingering crypto winter, inadequate disclosures and poor custodial practices can seriously harm retail and institutional customers alike.
On January 9, the Seventh Circuit overturned its own 39-year-old precedent to find that: (1) the definition of “transfer” for purposes of section 547 of the Bankruptcy Code depends on federal, not state, law; and (2) the date of “transfer” is the time at which the money passes to the creditor’s control.
In Worthy Lending LLC v. New Style Contractors. Inc., the New York Court of Appeals held that a security interest includes a lender’s right to force the borrower’s account debtors to remit payments directly to the lender, regardless of whether an event of default exists. Further, the court clarified that the Uniform Commercial Code (UCC) does not provide a distinction between a security interest and an assignment.
On July 19, 2022, the Ninth Circuit Bankruptcy Appellate Panel ruled that a creditor’s proof of claim — while meeting the standard of the Bankruptcy Code — was insufficient to enforce the debt under state law and was therefore subject to disallowance.