At the bottom of the stack in investment fund structures, there are generally “real” assets—things like equity interests in portfolio companies, mortgage loans, commercial receivables, maybe even bricks and mortar. Fund finance transactions, though, are by design crafted to be at several levels removed from such underlying assets. With such ultimate assets remote from the transaction, it may seem to fund finance practitioners that concerns about changes in the Uniform Commercial Code (“UCC”) relating to the nature of collateral assets are just as remote.

In the recent decision in Blockchain Group Company Limited (in liquidation) v. PKF Hong Kong Limited¹, Le Pichon DHCJ decided that despite an error resulting in a protective writ naming the defendant as a limited company and formerly a firm, the relevant provisions to amend a party’s name could not be used to essentially replace the limited company with the firm.

Insolvency Practitioners will welcome the UK Jurisdiction Taskforce’s (UKJT) Legal Statement on Digital Assets and English Insolvency Law, published on 17 April 2024.

On 17 April 2024 the UK Jurisdiction Taskforce (theUKJT), chaired by Sir Geoffrey Vos published its Legal Statement on Digital Assets and English Insolvency Law.

Digital assets may be new, but existing English insolvency laws and principles can deal with them. So finds the UK Jurisdiction Taskforce (UKJT) in its ‘Legal Statement on Digital Assets and English Insolvency Law’, published this week.

Key takeaways include:

Insolvency is a proliferating issue within the cryptocurrency ecosystem, specifically in the realm of crypto lending services. Many of the largest services have recently filed for bankruptcy, with Genesis, Voyager Digital, Celsius, and BlockFi falling in spectacular and contentious fashion [source: AP.news.com].

As noted by my partner David Besikof, the failure of various blockchain businesses is leading to a number of complications in Bankruptcy Court. However, these complications are now edging into allegations of outright fraud. The dimensions of the fraud alleged by Gemini here appear to be both fuzzy and sweeping.

BlockFi is a wealth management and trading firm for cryptocurrency holders that first commenced operations in 2017. In July 2021, we wrote about BlockFi’s bumpy road to going public, even though its valuation had just hit $5 billion.

In the landmark judgment by Linda Chan J in Re Gatecoin Ltd (in liquidation) [2023] HKCFI 914, the Court of First Instance held that cryptocurrencies were property under Hong Kong law capable of being held for distribution to creditors (or beneficiaries if they were trust assets) for the purposes of administrating an insolvent estate. In this article, the authors consider the Court’s ruling and its wider implications for the insolvency regime in Hong Kong, focusing on fraud claims and reviewable transactions in the cryptocurrency context.

Investing in or acquiring distressed assets can be a lucrative investment strategy for those with a healthy risk appetite and a roadmap for sourcing and evaluating quality assets.

Following a steep run-up in crypto asset prices and valuations of crypto-adjacent businesses in the last two years, there has been a sharp increase in companies and assets in the space looking at deeply distressed valuations, liquidity crunches or formal insolvency or bankruptcy proceedings.