Creal estate experts tell Sam Bankman-Fried bankruptcy story

Creal estate experts tell Sam Bankman-Fried bankruptcy story

As the world awaits the trial of Sam Bankman-Fried, DL News has taken a closer look at FTX's bankruptcy case.

The estate is suing Bankman-Fried's mom and dad for millions they allegedly misappropriated.

It depicts a picture 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 FTX's depositors are behind the juicy details and general media frenzy.

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. The fawning media coverage, celebrity endorses, appearances at prestigious conferences, and the disregard for professional dress codes that appear to be a iconoclastic boy genius, was seen as an iconoclastic boy genius.

The cognoscenti just wanted to know what the cognoscenti thought it was a good thing to do.

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 smooth, exactly, but it is a path well worn with precedent and clear laws facilitating the orderly winding down or restructuring of a business.

Debtors can stay in control of their companies, protected against asset grabs from creditors. Creditors may have to wait to get what they are owed, but they have a better chance of reclaiming it.

Cryptocurrencies are difficult to earn and can be hard to buy. No one is quite certain whether to treat them as commodities or securities. It's not always clear who owns Crypto - the failed lender/exchange or the user.

All these factors have implications for whether a depositor can get their crypto back, even in part.

Crypto creditors are often treated as unsecured, meaning they are at the back of the queue when the bankruptcy estate finally distributes assets.

distributions in unsecured claims are often pennies on the dollar.

In January, a federal judge ruled that Celsius, rather than some of its depositors, owned 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 get back around $2 billion in Bitcoin and Ether, plus 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 been burned in a crypto chapter 11 case? Would you like to talk about it? How crypto lawyers prepare to counterattack the SEC after Grayscale and Ripple court wins?

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