Bankman-Fried's bankruptcy case takes a hit

Bankman-Fried's bankruptcy case takes a hit

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

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

It paints 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, he said. They saw fawning media coverage, celebrity endorsements, appearances at prestigious conferences, and the disregard for professional dress codes that appeared to be an iconoclastic boy genius.

There was just so much speculation that the cognoscenti seem to have believed that it 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 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 remain in possession of their companies, protected against asset grabs from creditors. Creditors might have to wait to get what they owe, but they have a better chance of reclaiming the money they owe.

Cryptocurrencies are difficult to understand and value. No one is certain whether to treat them as commodities or securities. And it's not always clear who owns Crypto - the failed lender/exchange or the user.

Any of these factors have implications for a depositor's ability to receive their crypto back, even in part.

When the bankruptcy estate finally distributes assets, they are often treated as 'unsecured', meaning they are at the back of the queue.

And settlements in unsecured claims are often pennies on the dollar.

A federal judge ruled in January that Celsius 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 be paid up to $2 billion in Bitcoin and Ether, plus equity in the new company.

FTX has been able to collect $7.3 billion in assets. A Delaware court 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 rely on 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 and want to talk about it? How crypto lawyers will counterattack the SEC after Grayscale and Ripple court wins?

The SEC has commenced legal action against crypto industry firms, including those with large and small holdings. But lawyers for associations like the DeFi Education Fund said they are planning a counteroffensive. The complicated administrative regulations and challenges to implementation actions are a major problem.

Pearse Os' department for Communications Networks, Content and Technology told a summit recently. However, O'Donohue said the EC wants to build an EU-wide blockchain, but the industry must provide the know-how.