Joe Moldovan Quoted in Cointelegraph on Unprecedented Crypto Bankruptcy

Joe Moldovan was widely quoted in a November 17, 2022 Cointelegraph article entitled “Breaking Down FTX’s Bankruptcy: How It Differs From Other Chapter 11 Cases,” which discussed the recent bankruptcy of crypto exchange FTX and the many questions it poses for creditors, investors and industry experts.

The article examined the November 11 bankruptcy, considered one of the most complex bankruptcies in U.S. history due to its international corporate structure, the involvement of one million creditors, the 130 various entities that have filed and no clear precedent in commercial law regarding the treatment of crypto assets.

Joe said that the FTX Chapter 11 case is unique due to the unknowns. He stated, “What’s most unusual about the FTX bankruptcy is that the debtors are complex entities with significant amounts of debt. Normally, there are months and months of preparation. Corporate bankruptcies are usually very granular, choreographed and developed processes before they are filed. This is simply not the case with the FTX bankruptcy.”

He explained that questions regarding the amount of debt, assets and creditors associated with FTX remain unclear because the case has not yet had a first day hearing, the usual protocol in U.S. bankruptcy cases when “lead counsel for debtors walks the court and the public through why the case was filed. This gives a sense of what the long-term goal is and how it may be achieved.”

As for creditor recovery, Joe said, “You can’t make creditor distributions until these claims are analyzed. It’s also way too early to speculate on what kind of distribution creditors will get back. Though in mega cases, such as this, full recovery would be unusual.”

Ultimately, Joe expressed optimism regarding the court’s ability to deal with the complexities of a crypto bankruptcy. He said, “Every day in the United States, bankruptcy courts analyze, value and determine ownership of esoteric assets, crypto being one. At the heart of all this analysis is basic contract law. What do the documents that create the assets, state rights of ownership, and set forth the respective rights and relationships of the parties to the contract actually say? That the courts have not made certain determinations yet, merely reflects the novelty, meaning the newness, of the particular issues raised in a crypto bankruptcy. However, this will all be sorted out.”

Read the Cointelegraph article here.