As the world awaits the trial of Sam Bankman-Fried, DL News took a closer look at FTX's bankruptcy case.
The FTX estate is suing Bankman-Fried's mom and dad for millions they allegedly misappropriated.
The film depicts a portrait of two opportunistic Svengalis, closely advising the college grads running FTX, while treating it as their piggy bank - funding luxury homes, lavish travel, and campaign donations.
But behind the juicy details and general media frenzy are FTX's depositors.
I'm not talking about big firms like BlackRock or Sequoia - somehow, I think they'll be fine - but rather the million-odd ordinary people screwed out of $8 billion.
They were not gullible fools, he said. They saw the fawning media coverage, celebrity endorsements, appearances at prestigious events, and the disregard for professional dress codes that appeared to be an iconoclastic boy genius.
They just wanted in on what the cognoscenti looked to think was a good thing.
And now the creditors of FTX - including those of Celsius Network, Voyager Digital, Gemini Trust, BlockFi and so on - can only wait for the decisions of courts or restructuring teams.
Bankruptcy under chapter 11 of the US tax code is never seamless, but it is a path well worn with precedent and clear laws facilitating the orderly winding down or restructuring of a business.
Debtors have the ability to remain in possession of their companies, protected against asset grabs from creditors. Creditors may have to wait to get what they owe, but they have better chances of reclaiming the money they owe.
Cryptocurrencies are hard to sell because of their rarity. As commodities or securities, no one is certain whether they should be treated as commodities or securities. And it's not always clear who owns crypto - the failed lender/exchange or the user.
There is a significant impact on whether a depositor can receive their crypto back, even in part.
The debtors ofcryptocurrencies are often treated as 'unsecured', meaning they are at the back of the queue when the bankruptcy estate finally distributes assets.
And distributions in unsecured claims are often pennies on the dollar.
A federal judge ruled that Celsius, instead of some of its depositors, had access to most of the crypto on its platform, classifying the depositors as unsecured creditors.
Celsius creditors overwhelmingly voted to approve a restructuring plan that will see a new company formed. Investors will receive up to $2 billion of Bitcoin and Ether back, as well as equity in the new company.
FTX has accumulated $7.3 billion in assets. A Delaware court has ruled that customers can claim these assets from the restructuring plan.
So, these are happy endings.
It's worth remembering that for many people who trust Bankman-Fried and another potentially legit founder, Celsius CEO Alex Mashinsky, it's too little too late.
Have you ever been burned in a Crypto (Chapter 11) case and want to talk about it? How do crypto lawyers plan to counterattack the SEC when Grayscale and Ripple court wins?
The securities and exchanges have filed lawsuits against cryptocurrencies, including companies that are large and small. But lawyers for associations such as the DeFi Education Fund told DL News they are planning a counteroffensive. Obscure administrative laws and obstacles to enforcement actions.
Pearse O's Department for Communications Networks, Content and Technology, told a summit last month. O'Donohue said the EU wants to create an EU-wide blockchain, but the market must provide the know-how.