FTX Bankruptcy Case Could Drag On for Years
According to Alan R. Rosenberg, a partner at Markowitz Ringel Trusty & Hartog, the FTX bankruptcy case is expected to last longer than other crypto bankruptcies due to multiple clawback claims and the involvement of large organizations. The case, filed in November, seeks to recover over $8 billion. Rosenberg stated that significant transfers made to capable organizations could prolong the legal proceedings.
Rosenberg added that these types of claims are typically resolved through settlements outside of court, but negotiations can take time. Additionally, FTX is facing a $24 billion claim from the Internal Revenue Service for unpaid taxes.
The Flurry of Lawsuits
FTX has settled mutual adversary complaints with Genesis, but unresolved complaints against other parties include a $1 billion lawsuit against ByBit and attempts to recover funds from its philanthropic arm and celebrity promotions. There are also lawsuits involving alleged fraudulent transactions and FTX’s legal action against former executives and CEO Sam Bankman-Fried’s parents.
Rosenberg anticipates more complaints in the future, potentially related to FTX investments and political donations.
Calculating Crypto Value and Payment Methods
Rosenberg highlighted the challenge of valuing cryptocurrency in avoidance action litigation, as there is no definitive case law on the matter. He mentioned that the 2014 bankruptcy case of HashFast could be used as a precedent.
In terms of creditor payment methods, there are no official rules regarding whether creditors should be paid in crypto or fiat money. However, Rosenberg hopes that new regulations will be established given the increasing number of crypto bankruptcies and mainstream adoption of cryptocurrencies.
Hot Take: The Lengthy Battle Ahead for FTX
While 2023 may be remembered for a surge in crypto bankruptcy cases, the FTX bankruptcy case stands out due to its complexity and high stakes. With multiple clawback claims, unresolved lawsuits, and a significant tax claim from the IRS, the legal battle is expected to drag on for years. FTX’s former leadership’s spending habits and the involvement of various organizations and individuals have further complicated the proceedings. The case highlights the need for clearer regulations on valuing cryptocurrencies in litigation and determining creditor payment methods. As the case unfolds, it will likely set precedents that could shape future crypto bankruptcy cases.
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