Joe Moldovan and Jason Gottlieb Publish Article on FTX and Crypto Bankruptcies in Bloomberg Law

Joe Moldovan and Jason Gottlieb wrote an article entitled “How the Bankruptcy Code Impacts User Access to FTX Assets,” which was published on BloombergLaw.com on November 22, 2022. Joe and Jason discuss the recent string of crypto bankruptcies and the one million-plus individuals calling for access to their accounts, coins, and tokens, acknowledging the biggest obstacle to resolution. They write: “Standing in their way is the answer to this question: What is property of a debtor’s estate, or more to the point, what is not property of the estate? The other question that may matter just as much is what difference does it make?”

The authors state: “The most important exception to the voracious appetite of the estate, is property held by a debtor in some kind of a trust, and whether the hollowed-out crypto estates hold an individual’s money, coins, or tokens in trust is perhaps the most important question in all of the crypto bankruptcies, especially FTX.”

The authors discuss the crypto mantra, “not your keys, not your coins,” which implies that “if your crypto is stored in a wallet with a private key that only you hold, no one can dispute that the crypto is yours.” They then raise the question: “If your crypto is stored in a wallet on an exchange, and that exchange goes into bankruptcy, then what?” They also discuss further complications in the FTX case, such as venue. “FTX was incorporated in Antigua and Barbuda, headquartered in The Bahamas, and did business globally. Though 100-plus FTX cases were filed in the bankruptcy court in Delaware, a case has also started in the Bahamas. This has caused a jurisdictional fight.”

Joe and Jason conclude that the question of what happens to whatever money is left in FTX or can be recovered by the estate for creditors, and whose money it is, cannot yet be answered. “It is way too soon to tell,” they wrote.

Read the Bloomberg Law article here.