: FTX filed for Chapter 11 bankruptcy. Here’s what account holders should know about this ‘very messy and complex bankruptcy case.’

by | Nov 11, 2022 | Stock Market

FTX, the unraveling cryptocurrency exchange, has plummeted from its high-profile perch straight into bankruptcy court. On Friday morning, FTX and related entities including Alameda Research, its affiliated crypto trading firm, filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the District of Delaware. FTX has a reported $8 billion shortfall, and the firm’s CEO, Sam Bankman-Fried, has resigned.

The fall from grace has been swift. Now, however, the court-monitored resolution about which creditors — from lenders to account holders — will get paid and how much they will receive may be time-consuming and complicated, experts say. “Customers should prepare for what could be a very messy and complex bankruptcy case,” said Daniel Besikof, partner at Loeb & Loeb. But should they prepare to get their money back? That’s a potentially different story, Besikof said. “FTX’s terms of service provide that customer deposits are to remain property of the customers. If that’s how it turns out, and if the customer deposits still exist, then customers would have the right to recover those deposits, likely relatively quickly. However, it’s a complicated issue, and it’s not clear what position FTX will take or what deposits still remain,” he said. But if the deposits are viewed as the property of FTX, chances are customers will not receive distributions until a court-ordered repayment plan is hammered out — “which is several months away, at least,” Besikof said. In addition to the FTX bankruptcy filing, other pending bankruptcy cases feature crypto exchanges Voyager Digital and Celsius Network; crypto hedge fund Three Arrows Capital is also tied up in bankruptcy proceedings. Meanwhile, any case law on crypto bankruptcy cases abro …

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