Lost your crypto amid Chapter 11 bankruptcy filings? You probably won’t get it back

If you lost access your money when the crypto company that holds your assets has filed for bankruptcy, then you’re probably out of luck.

As Chapter 11 bankruptcy proceedings progress for several major crypto companies, those who have lost funds are surely hoping to recover all – or at least some – of their money. Lawyers and experts shared their thoughts with TechCrunch on what these cases could mean for creditors and what could happen to those who saw their money disappear overnight.

Earlier this month, Genesis Global Tradinga subsidiary of crypto conglomerate Digital Currency Group (DCG), filed for Chapter 11 bankruptcy. Genesis is the latest crypto-focused entity to join the Chapter 11 bankruptcy club alongside FTX, BlockFi, Capital of the Three Arrows, Celsius Network and Traveler – all of whom filed in mid to late 2022.

For the latest Chapter 11 depositors, Genesis owes over $3.6 billion to its top 50 unsecured creditors, while FTX owes its top 50 unsecured creditors over $3 billion. The bankruptcy filings have redacted most — if not all — of the identifying information of the parties involved.

One of FTX’s Biggest Unsecured Creditors Owes Over $226 Million, and the Company Could Have more than a million creditorsaccording to previous bankruptcy filings.

“If I was a creditor of FTX, I would hope for the best, but I would expect to face reality. If you get more than 2 cents on the dollar, I consider myself lucky. Terrence Yang, CEO of Swan Bitcoin

It is therefore safe to say that many people are heavily invested in the outcome of these bankruptcies, as their funds, ranging from small sums to millions of dollars, are involved. But it is not certain that they will ever see the deposited funds again.

What happens to creditors “really depends on the mix of assets and liabilities of the business as well as the bankruptcy prospects of the same business,” Jason Allegrante, chief legal officer and chief compliance officer at Fireblocks, told TechCrunch. . “If the business is otherwise healthy but has suffered a liquidity shock, for example, there is still a chance that the business can recover and generate revenue,” meaning creditors can be reunited with a party. of their funds.

Secured creditors will have priority “if and when the assets are distributed,” Joel Telpner, general counsel at Input Output Global and special counsel at Sullivan & Worcester, told TechCrunch. “All other creditors are lining up after the first payment from secured creditors. If it is a company with shareholders, then if there is anything left, it will go to the shareholders.

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