Crypto Bankruptcies: Whose Money Is It?
Reuters asked attorneys what significant rulings could come from the recent bankruptcies of crypto lenders. Troutman Pepper Partner Deborah Kovsky-Apap weighs in:
So you have debtors that go into bankruptcy, and they are holding all of these digital assets on their platforms. The question is: Who actually owns them?
…
I would expect to see modifications of terms of service and the way that depositors interact with these exchanges based on the rulings that are coming out of these cases.
…
The policy behind it is that we don't want some creditors of the debtor to get 100% and other creditors of the debtor to only get 25%, we want to claw it all back and everybody gets 50%. Which is not great for folks who are feeling like, "Well gosh, these were my assets."
…
It is possible, and it has happened, that unofficial stockbrokers or entities that are determined to be stockbrokers within the definition of the bankruptcy code, have been forced to liquidate under Chapter 7. A stockbroker is not eligible to proceed under Chapter 11 of the bankruptcy code.