In the current economic climate, more and more companies are getting into financial difficulties, informal workouts by debtor companies, with support from certain creditors, seem to be increasingly common.

On 30 October 2023, the UK government published an update on its legislative approach for regulating fiat-backed stablecoins, following on from its consultation on the UK regulatory approach to cryptoassets and stablecoins in January 2021, and the response to that consultation in April 2022. Alongside this, it published a response to its consultation on the approach to managing the failure of systemic digital settlement asset (DSA) (including stablecoin) firms.

With the passing of the Moveable Transactions (Scotland) Act (MTSA) (likely to pass into law in 2024) the way in which we take security over rights and assets in Scotland will be brought firmly into the 21st century, doing away with the need to rely on statutes from as long ago as 1862 and a smattering of case law which has fostered uncertainty in the market for almost as long.

In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer.

In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer.

In Short:

The Situation: After the nationalization of the Dutch SNS banking and insurance group, the Dutch Minister of Finance offered zero compensation to expropriated bondholders.

The Result: Ten years after the nationalization, the Dutch Supreme Court confirmed compensation awards totaling approximately €1 billion including accrued interest.

Looking Ahead: The SNS case provides some interesting lessons on where those seeking compensation in the context of bank bailouts and resolutions may head.

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.

THE BRIEF

FINANCIAL SERVICES LITIGATION QUARTERLY

FALL 2023

1

TABLE OF CONTENTS

Were There Underwriting Requirements for PPP Loans After All? The Sound-Value Requirement May Pose Risk for PPP Lenders

3

Noteworthy10

District Court Upholds New ERISA Rules on ESG Investing

10

Fourth Circuit Holds That Class-Action Waivers Must Be Addressed Before Class Certification

12

Ninth Circuit: Fees for Claims-Made Settlements Must Be Based on Actual Recovery

13

The Federal Trade Commission (FTC) announced it has reached a settlement with the bankrupt crypto company Voyager over the company’s alleged deceptive crypto marketing practices. Specifically, the FTC’s complaint alleges that from at least 2018 until its declaration of bankruptcy in July 2022, Voyager enticed consumers with promises that their deposits were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe.” However, consumers’ deposits with Voyager were not eligible for FDIC insurance and were not protected in the event that Voyager failed.

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.